The Andersons neighbor just told John and Susan that when they were at the city planning meeting, they heard that the city was going to be building a new highway and that the city is going to condemn all the properties in the way, which includes 571 Raze Drive. John has come to you to ask about the tax impact should this occur.

Evaluate and explain the tax implications, if this property is condemned. If the city offers $395,000, compute the tax implication and when a gain or loss would be realized, and if it must be recognized. If it is possible to avoid recognition of a gain, explain what the Andersons must do to accomplish that.