Mrs. Mac acquires an office building for $7,000,000 and incurs $100,000 of acquisition costs. She obtains an interest-only mortgage for $3,000,000 and uses her own money for the rest. Tax records indicate the appraised value of the property is $1 million for the land and $3 million for the building ( i.e. 25%/75% ratio).

1a. What is the basis of the property

1b.Of the total basis, how much is allocated to land

1c.How much is allocated to building

1d. What is the annual depreciation expense

After 3 full years, Mrs. Mac sells the building for $8,000,000. Shee wishes to enter in a 1031 exchange transaction.

1e. What is the gain on the sale of the asset

1f. How much cash is sent to the qualified intermediary

Mrs. Mac buys a new building within the required time period for $9,000,000. Shee obtains a $4,000,000 mortgage for this asset.

1g. What is the new basis of this replacement property

1h. If Mac obtained a $5,000,000 mortgage instead, what is the boot received on the transaction and what is the tax implication