Question No 1. James Newman is a widower with two children, Buck and Anita. James owns a lake cabin, used as a second home, which he and his wife, Kara, purchased (as community property) in 1978 for $35,000. In 1997 the Vandals remodeled the cabin by obtaining a $550,000 loan from the Fourth First National Bank of Palouse by executing a note and mortgage. The current balance of the note is $300,000. James is considering disposing the lake cabin and moving into a retirement center. The cabin has a current (as of December 10, 2020) market value of $1,200,000. In April 2020, Anita asked James to sell the cabin to her (Anita) for $800,000. James responded by saying that he would transfer the cabin to Anita for $300,000, if Anita would pay $450,000 to Buck and promise to visit James in the retirement center as much as possible. On August 23, 2020, James transferred the cabin to Anita, after receiving $300,000 from Anita and Anita paying Buck $450,000. The value of the cabin at Karas death in 1999 was $500,000 and 1/2 its value ($250,000) was included in her estate. Karas 1/2 interest in the cabin was devised to James. James then owned all (100%) of the cabin as he already owned 1/2 interest of the cabin. James and Mary were married in 1973 and at all times lived in Idaho.

(c) Applying the facts in problem 1(a) hereinabove, what was Bucks gain or loss, if any at the time he received the $450,000 from Anita?

Gain (Loss): $_________________ Character of Gain or Loss _______________ Basis $_____________

Explain and support your answer, providing necessary supporting calculations. Computations only will not be sufficient

Space for computations

Space for written answer