Pamela Owns Land for Investment Purposes

question 38

Multiple Choice

Pamela owns land for investment purposes.The land is worth $300,000 (basis of $260,000 to Pamela) .Pamela exchanges the land,plus $20,000 cash,for a warehouse to be used in her business.The FMV of the warehouse is $400,000,but the warehouse is subject to a mortgage of $80,000,which is assumed by Pamela.Pamela must recognize a gain of

• A)$0.
• B)$40,000.
• C)$120,000.
• D)$140,000.

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Definitions:

Substitutes

Products or services that can replace each other in use, offering consumers alternatives.

Necessity

A necessity is a good or service that is considered essential for basic living and well-being, such as food, water, and shelter.

Price Elasticity

The responsiveness of the quantity demanded of a good to a change in its price.

Midpoint Formula

A method used in economics and mathematics to calculate the average rate of change or percentage change between two points on a line or curve.