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John owns a rental home in Arizona. He decided that he would like to acquire a rental home in Washington. Ted, who lives in Washington,

John owns a rental home in Arizona. He decided that he would like to acquire a rental home in Washington. Ted, who lives in Washington, has a rental home. For health purposes, Ted must relocate to Arizona and would like a rental home in Arizona. John and Ted decide to exchange properties under Section 1031 of the code. The other facts pertaining to the exchange are: Ted's Basis = $100,000 John's Basis = $75,000 Ted and John exchange the two properties, but Ted has to give John an additional $25,000 in cash. The fair market value of Ted's property is $100,000 and the fair market value of John's property is $125,000. What is John's basis in the property received in the exchange?

$25,000.

$50,000.

$75,000.

$100,000.

Income Tax

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