Hyacinth Realty Company owns land in Iowa that was originally purchased for $130,000. Hyacinth has received an all-cash offer in the amount of $400,000 from a wellknown shopping center developer. An international real estate broker has now offered some land located outside Florence, Italy, that is worth $400,000 in exchange for the Iowa property.
Please write the company a letter analyzing these options from a tax standpoint. Hyacinth’s address is 2501 Longview Lane, Des Moines, IA 50311.
Oak Company owns undeveloped land (adjusted basis of $275,000) that it exchanges for $45,000 cash and an office building (fair market value of $320,000) to be used in the business.
a. What is Oak’s realized gain or loss?
b. Its recognized gain or loss?
c. Its basis in the office building?
A warehouse owned by Marmot & Squirrel (a partnership) and used in its business ISSUE ID (i.e., to store inventory) is being condemned by the city to provide a right of way for a highway. The warehouse has appreciated by $100,000 based on an estimate of fair market value. In the negotiations, the city is offering $40,000 less than what Marmot & Squirrel believes the property is worth. Alan, a real estate broker, has offered to purchase the property for $25,000 more than the city’s offer. The partnership plans to invest the proceeds it will receive in an office building that it will lease to various tenants.
Identify the relevant tax issues for Marmot & Squirrel.
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