On October 1, Paula Exchanged an Apartment Building (Adjusted Basis

question 30

Multiple Choice

On October 1, Paula exchanged an apartment building (adjusted basis of $375,000 and subject to a mortgage of $125,000) for another apartment building owned by Nick (fair market value of $550,000 and subject to a mortgage of $125,000) . The property transfers were made subject to the mortgages. What amount of gain should Paula recognize?

• A) $0
• B) $25,000
• C) $125,000
• D) $175,000
• E) None of the above

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Definitions:

Systematic Desensitization

A type of behavioral therapy used to gradually reduce phobic reactions and anxiety through counterconditioning.

Cognitive Therapy

A form of psychotherapy that focuses on changing unhelpful or unhealthy thought patterns that contribute to emotional distress and mental health issues.

Depressed Clients

Individuals seeking help for depression, a mood disorder characterized by persistently low mood and a feeling of sadness and loss of interest.

Irrational Thinking

A thought process where the individual fails to reasonably consider the full scope of information or logical analysis in reaching a decision or conclusion.