Problem 1:
Barb owns Williams Tower, an apartment building. Barb's adjusted basis in Williams is $400,000 and it is subject to a mortgage of $260,000. Dan owns Portland Arms, a commercial office building. It is worth $800,000 and is subject to a mortgage of $350,000. Dan's adjusted basis in Portland is $400,000.
Both Barb and Dan acquired their properties 5 years ago and depreciation was straight-line.
Barb and Dan exchange properties and, in addition, Barb transfers antique jewelry, worth $10,000 in which she had a basis of $2,000 to Dan. Barb inherited the jewelry from her mother many years ago. Each assumes the others mortgage (with the consent of the lenders).
a) What are the tax consequences of this exchange to Barb?
1) List of authorities relied upon:
2) Response:
b) What are the tax consequences of this exchange to Dan?
1) List of authorities relied upon:
2) Response:
Problem 2:
As has been covered throughout this course, there are numerous provisions in the Code that treat transactions between related parties differently than transactions between unrelated parties. Note three provisions that would alter the tax consequences of transactions based on relationships. Provide a brief description of how each provision works and what parties are affected.
Discuss the authorities within the body of the response itself.
a) Provision 1 Response:
b) Provision 2 Response:
c) Provision 3 Response: