Question No. 6. (16.67% - 20 minutes)

(a) Seller agrees to sell land to Buyer who puts cash in an amount equal to the value of the land into an escrow account. Seller did not use the land in a trade or business, but only held the land hoping it would increase in value. The escrow provides for Seller to select commercial property equal in value to the land. (The Seller will rent the commercial property to other businesses). Buyer will then acquire the commercial property with the escrowed cash and transfer the commercial property to Seller. Seller fails to find adequate property and the deal collapses. One year after the escrow account is opened, Seller selects other commercial property that Buyer acquires with the escrowed cash and transfers it to Seller in exchange for the land.

Discuss the income tax consequences, if any, to Seller. Is there anything that you would have advised Seller to do differently? What? Why? Discuss and explain.

(b1) Arthur Beaman is employed by Conway, Dawkins and Edwards, LLP, a public accounting firm whose main office is located in Chicago. The firm also maintains a second office in Peoria, Illinois, located approximately 160 miles from Chicago. Beaman's family resides in the Peoria area because the schools are better in Peoria. Arthur is assigned to the Peoria office approximately 40% of the time and Beaman spends about 60% of his time in the Chicago office. Beaman maintains an apartment in Chicago and lives in the apartment while in Chicago. Arthur usually flies by airplane when going between Chicago and Peoria. Discuss any and all deductions, if any, in detail, which Arthur is entitled to take on his U.S. Individual Income Tax Return.

(b-2) Twice a month, Arthur is sent to the Elgin office where is spends one day, having lunch and dinner before returning in the evening to Chicago. Discuss any and all deductions, if any, in detail, which Arthur is entitled to take on his U.S. Individual Income Tax Return.