1. Kathy and Annise are a married couple who file jointly. In the current year, they have net ordinary income of $10,000 from a partnership interest in which they do not materially participate. They also have a net loss of $30,000 from a rent house in which they actively participate. Their adjusted gross income (AGI) exclusive of these investments is $120,000. What is their AGI after taking into account these investments?

   		$105,000
   		$125,000
   		$120,000
   		$100,000

1. On July 15, Year 1, Blancas office building burned to the ground due to an electrical fire. The buildings adjusted basis at the time of the fire was $100,000 but it was insured for $550,000, which Blanca received on August 1, Year 1. On December 1, Year 3, Blanca purchased a new office building at a cost of $500,000. Under the involuntary conversion rules of Code Section 1033, what is Blancas tax basis in the new building?

   		$100,000
   		$150,000
   		$450,000
   		$500,000