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Background: On 2/11l1988, Ted Mitchell purchased some farm land to be held as a rental property investment. Ted originally purchased the land for $3,000,000 and took out a mortgage of $1,800,000 as part of the purchase. As of 10/31/2018, the farm land had increased in value to $7,500,000, and the principal balance of the mortgage had been paid down to $1,650,000. On 10/31/2018, Ted completed an IRC Section 1031 exchange in which he traded his farm land (subject to the mortgage] and acquired an apartment property which was valued at $12,500,000 and was subject to a mortgage of $6,900,000. Ted was paid cash to equalize the difference in equities in the two properties. The apartment building acqurred by Ted was formerly owned by Tolar Bear The escrow closing statement for the exchange Is shown below Charges Credits Fair market value of the land given up by Ted Mortgage on the land assumed by Tolar Bear in the exchange Fair market value of the apartment property acquired by Ted 12,500,000 Tolar's apartment property mortgage assumed by Ted in the exchange Prepaid apartment property taxes charged to Ted in the exchange 15,000 Net cash paid to Ted in the exchange 235,000 Totals 14,400,000 (14,400,000) The apartment property's value consisted of $2,500,000 allocable to the land and $10,000,000 alloca ble to the apartment building for a total valuation of $12,500,000. Ted's cash activity on the two properties during 2018 was as fo Rental income received Property taxes actually paid Interest expense on the mortgages paid by Ted Other rental property expenses (insurance, maintenance, etc.) (45,000) (20,000) Net cash flow from each of the properties 460,000 130,000 REQUIRED: A. How much gain, if any, must Ted RECOGNIZE on this exchange? B. What is Ted's BASIS in the apartment property acquired in the exchange? C. What is Ted's NET RENTAL INCOME for 2018 from EACH of the properties (farm 8: apartment}? | l l