James Corporation Exchanges a Building (Fair Market Value = $800,000,adjusted

question 17

Multiple Choice

James corporation exchanges a building (fair market value = $800,000,adjusted basis = $600,000) that has a $100,000 mortgage for another building owned by Pete Corporation (fair market value = $1,100,000,adjusted basis = $600,000) that is encumbered by a $400,000 mortgage.Each party assumed the mortgage on the building received.What are James's and Pete's realized gains on this exchange,respectively?

• A)$200,000,$500,000
• B)$200,000,$600,000
• C)$500,000,$600,000
• D)$500,000,$500,000
• E)None of the above

---

Definitions:

Aggregate Demand Curve

A graphical representation showing the relationship between the total quantity of goods and services that households, businesses, and the government are willing to purchase at each price level.

Price Level

A measure of the average prices of goods and services in an economy at a given time, often used to monitor inflation or deflation.

Short-Run Aggregate-Supply Curve

A curve that shows the relationship between the total output of goods and services and the price level for output in the short run.

Wages Are Sticky

The theory that salaries do not adjust quickly to changes in market conditions, leading to unemployment or surpluses.