Mr. X owned an apartment building. He exchanged it for Ms. Ys mansion, which Mr. X remodeled and uses as his office for his Schedule C accounting practice.

Here are some additional facts:

• Mr. Xs adjusted basis in his apartment building was $1,400,000.
• Ms. Ys adjusted basis in her mansion was $2,250,000.
• No cash or other / additional consideration passed in either direction in connection with the exchange, and neither property was encumbered by any debt.
• On the county property tax rolls, Mr. Xs apartment building was listed at a value of $3.25 million, Ms. Ys mansion at $3.6 million.
• Ms. Y actually lived in her mansion; it was strictly her personal residence she never carried on any trade or business there, nor did anything else that ever would have resulted in classification of the mansion as anything other than personal-use property.

1. If Mr. X was your client, would you advise him that he could treat this as a good 1031 LKE? Why or why not?

2. What was Mr. Xs tax basis in the mansion immediately after the exchange?