Question 1 (12 marks)

1. In March 2018, Bruce exchanged land with an adjusted basis of $42,000 and a fair market value of $50,000 for office furniture owned by Sam. At the date of exchange, the adjusted basis of the furniture was $44,000, and it had a fair market value of $40,000. In addition, Sam paid Bruce $10,000 in cash. Bruce used the office furniture to replace his old furniture. Sam built a warehouse on the land. i) What is the amount of gain realized by Bruce? ii) What is the amount of gain recognized by Bruce? iii) What is Bruces basis in the furniture?
2. In July 2018, Bruce exchanged a small apartment building that he owned for a small strip mall owned by Tony. At the date of the exchange, the apartment building had an adjusted basis of $770,000 and a fair market value of $1,000,000. The strip mall had an adjusted basis of $650,000 and a fair market value of $900,000. In addition, Tony gave Bruce marketable securities with a basis of $75,000 and a fair market value of $100,000. Since the exchange, none of the assets, including the marketable securities, have been resold. i) What is the amount of gain realized and recognized by Bruce? ii) What is the amount of gain realized and recognized by Tony? iii) What is Bruces basis in the strip mall?
3. Bruce also owned a fishing cabin in Alaska that he used as a rental property. The cabin had an adjusted basis of $90,000. Bruces brother, Burt, owned a hunting cabin in Vermont that he used as a rental property. His cabin had an adjusted basis of $269,000. Bruce and Burt exchanged cabins. At the time of the exchange, each cabin had a fair market value of $400,000. Six months after the exchange, Bruce sold the Vermont cabin for $475,000 to a third party. Calculate the realized and recognized gains for Bruce and Burt i) at the date of exchange and ii) at the date of Bruces sale.