Claiborne, Inc. has received an offer to purchase its manufacturing facilities for

$7,500,000. If sold, it would have a gain of $5,000,000 on the property. Claiborne has found an ideal location for a new facility, but the only available property is three times as large as it needs. It can, however, acquire a one-third interest in the property and move its operations into that area.The purchaser of its property is willing to cooperate in an indirect exchange.

AppendixLO1