Bart exchanges some real estate (basis of $800,000 and fair market value of $1 million) for other real estate owned by Roland (basis of $1.2 million and fair market value of $900,000) and $100,000 in cash. The real estate involved is unimproved and is held by Bart and Roland, before and after the exchange, as investment property.

a. What is Bart’s realized gain on the exchange? Recognized gain?

b. What is Roland’s realized loss? Recognized loss?

c. Support your results to

(a) and

(b) under the wherewithal to pay concept as applied to like-kind exchanges (§ 1031).

47. LO.2, 3 Using the legend provided, classify the overall objective of the particular tax provision.

Legend CE = Control of the economy W = Wherewithal to pay concept EA = Encouragement of certain activities AF = Administrative feasibility EI = Encouragement of certain industries ESB = Encouragement of small business SC = Social considerations

a. Like-kind exchange treatment.

b. An increase in the individual tax rate.

c. The S corporation election.

d. Adoption expense credit.

e. Percentage depletion.

f. Unified estate tax credit.

g. Charitable contribution deduction.