1. John owns a parcel of land in San Diego. He originally purchased the land in 1990 for $300,000. The current FMV is $1,100,000. The government seized his land in order to build a freeway. In exchange for seizing his land, the government gave John another parcel of land located nearby that was worth $1,100,000. What is John's recognized gain or loss on this disposition, and what is his basis in the new parcel of land he received?

2. A building used in Torero Company’s production facility was recently completely destroyed by fire. The building originally cost $2,000,000, but the company had previously recognized $800,000 of MACRS depreciation at the time of the fire. The insurance company paid Torero $2,600,000 cash to replace the building. Torero used the cash and purchased a new building for $2,500,000. What is Torero Company’s recognized gain or loss on this disposition, and what is their basis in the new building they purchased?

How would your answers change if Torero Company used the cash to purchase a new building for $2,700,000 instead of $2,500,000?

3. Torero Corporation sells a machine used in its business for $1.2 million. The Buyer agrees to pay $700,000 in cash during the current tax year, and it promises to pay $500,000 one year later. Torero Corporation had paid $800,000 for the machine and had $450,000 of accumulated depreciation at the time of the sale. What is the amount of the gain or loss that Torero Corporation must recognize in the current tax year?