Mr. X owned an apartment building. He exchanged it for Ms. Y’s mansion, which Mr. X remodeled and uses as his office for his Schedule C accounting practice. Here are some additional facts: Mr. X’s adjusted basis in his apartment building was $1,400,000. Ms. Y’s adjusted basis in her mansion was $2,250,000. No cash or other / additional consideration passed in either direction in connection with the exchange. Neither property was encumbered by any debt. On the county property tax rolls, Mr. X’s apartment building was listed at a value of $3.25 million. On the county property tax rolls, Ms. Y’s mansion was listed at a value of $3.6 million. At the time of the exchange and for years before, Ms. Y actually lived in her mansion; it was strictly her personal residence – she never carried on any trade or business there, nor did anything else that ever would have re-sulted in classification of the mansion as anything other than personal use property. Would you advise Mr. X that he could treat this as a good § 1031 LKE? Why or why not? 2. What was Mr. X’s tax basis in the mansion immediately after the exchange?
Mr. X owned an apartment building. He exchanged it for Ms. Y’s mansion, which Mr. X remodeled and uses as his office for his Schedule C accounting practice. Here are some additional facts: Mr. X’s adjusted basis in his apartment building was $1,400,000. Ms. Y’s adjusted basis in her mansion was $2,250,000. No cash or other / additional consideration passed in either direction in connection with the exchange. Neither property was encumbered by any debt. On the county property tax rolls, Mr. X’s apartment building was listed at a value of $3.25 million. On the county property tax rolls, Ms. Y’s mansion was listed at a value of $3.6 million. At the time of the exchange and for years before, Ms. Y actually lived in her mansion; it was strictly her personal residence – she never carried on any trade or business there, nor did anything else that ever would have re-sulted in classification of the mansion as anything other than personal use property. Would you advise Mr. X that he could treat this as a good § 1031 LKE? Why or why not? 2. What was Mr. X’s tax basis in the mansion immediately after the exchange?
Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization
Section: Chapter Questions
Problem 31P
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Mr. X owned an apartment building. He exchanged it for Ms. Y’s mansion, which Mr. X remodeled and uses as his office for his Schedule C accounting practice.
Here are some additional facts:
- Mr. X’s adjusted basis in his apartment building was $1,400,000.
- Ms. Y’s adjusted basis in her mansion was $2,250,000.
- No cash or other / additional consideration passed in either direction in connection with the exchange.
- Neither property was encumbered by any debt.
- On the county property tax rolls, Mr. X’s apartment building was listed at a value of $3.25 million.
- On the county property tax rolls, Ms. Y’s mansion was listed at a value of $3.6 million.
- At the time of the exchange and for years before, Ms. Y actually lived in her mansion; it was strictly her personal residence – she never carried on any trade or business there, nor did anything else that ever would have re-sulted in classification of the mansion as anything other than personal use property.
- Would you advise Mr. X that he could treat this as a good § 1031 LKE? Why or why not?
2. What was Mr. X’s tax basis in the mansion immediately after the exchange?
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