Refer to Chapter 12, section 12-4, LIKE-KIND EXCHANGES.

Mr. X owned an apartment building. He exchanged it for Ms. Ys mansion, which Mr. X intended to, and did, remodel and use as his office for his accounting prac-tice (Schedule C).

Here are some additional facts:

• Mr. Xs adjusted basis in his apartment building was $1,400,000.
• Ms. Ys adjusted basis in her mansion was $2,250,000.
• No cash or other / additional consideration passed in either direction in connection with the exchange, and neither property was encumbered by any debt.
• On the county property tax rolls, Mr. Xs apartment building was listed at a value of $3.25 million, Ms. Ys mansion at $3.6 million.
• Ms. Y actually lived in her mansion; it was her personal residence only.

1. If Mr. X was your client, would you advise him that he could treat this transac-tion as a good 1031 LKE? Why or why not?

2. What was Mr. Xs tax basis in the mansion immediately after the exchange was completed?