Q1. Frances exchanges an apartment building complex, Forestview, with a fair market value of $500,000, subject to a mortgage of $200,000, for Oceanview an apartment building complex owned by Gayle. The fair market value of Oceanview is $500,000, and it is subject to a mortgage of $250, 000. Gayle also transfers $50,000 of cash to Frances. Frances' basis in Forestview is $150,000. Gayle's basis in Oceanview is $100,000. How much gain is realized and recognized by Frances and Gayle? What are Frances' and Gayle's respective bases in the property received by each?
Q2. Frieda leased Beryllium Acres (the site of a former mine) to Aqua Boy, who developed a children's water park on the site. Both Frieda and Aqua Boy are calendar year cash method taxpayers and are not related to one another. The rental agreement required annual rental payments of $30,000 due in advance on December 31 of the preceding year. In the following circumstances, when do Frieda and Aqua Boy account for the receipt and payment of the rental?
a) Aqua Boy mailed the check on December 29. Frieda received the check on January 3.
b) Aqua Boy wrote the check on December 31, but could not leave the annual Polar Bear swim and ice-skating event at the water park, so he could not mail it. Aqua Boy sent Frieda an e-mail notifying her that she could pick up the check if she desired. Frieda did not pick up the check and Aqua Boy put it in the mail on January 2. Frieda received the check on January 3.
c) The lease was for five years. Frieda required a down payment of $100,000 at the time the lease was entered into, and annual payments of $30,000 due on December 31 of each year. How should Frieda and Aqua Boy treat the $100,000 payment made at the lease signing?