Your client, Covina Real Estate Holding, Inc. (CREH), purchased some land 10 years ago for $25,000, intending to build a new office building. For a number of reasons, the office building was not constructed. The land is currently worth $300,000. Recently, the decision to construct the office building is being reconsidered, but in a different city. There is a 5-acre lot in the other city that would be a desirable location. It has a fair market value of $400,000. The CEO of CREH, Stephen Bradford, wants to acquire the 5-acre lot be exchanging their piece of property plus $100,000 cash. The other owner has agreed to accept the land and cash in exchange for the 5-acre lot.

Stephen does not know the appropriate way to record the acquisition of the new lot. He is also uncertain how this transaction will be reported on the corporate tax return. He has engaged you to advise him on both issues.

Please answer the question regarding both the accounting and tax treatment of the land acquisition. The answer will consist of two sections, one explaining the accounting treatment and one explaining the tax treatment, must include all appropriate citations to the ASC pronouncements, Internal Revenue Code, or IRS used to form your opinion.