Steve owns real estate (adjusted basis of $12,000 and fair market value of $15,000), which he uses in his business. Steve sells the real estate for $15,000 to Aubry (a dealer) and then purchases a new parcel of land for $15,000 from Joan (also a dealer). The new parcel of land qualifies as like-kind property.

a)What are Steve's realized and recognized gain on the sale of the land he sold to Aubry?

b)What is Steve's basis for the land he purchased from Joan?

c)What factors would motivate Steve to sell his land to Aubry and purchase the land from Joan rather than exchange one machine for the other?

d)Assume that the adjusted basis of Steve's original parcel of land is $15,000 and the fair market value of both parcels of land is $12,000. Respond to parts (a) through (c).