Babex Inc and OMG Company Entered into an Exchange of Real

question 104

Multiple Choice

Babex Inc. and OMG Company entered into an exchange of real property. Here is the information for the properties to be exchanged. $$\begin{array} { l r r } & \text { Babex } & O M G \\\text { FMV } & \$ 1,000,000 & \$ 825,000 \\\text { Adjusted tax basis } & \mathbf { 7 6 8 , 0 0 0 } & \mathbf { 5 1 4 , 5 0 0 } \\\text { Mortgage } & \mathbf { 1 7 5 , 0 0 0 } & - \mathbf { 0 } -\end{array}$$ Pursuant to the exchange, OMG assumed the mortgage on the Babex property. Compute Babex's gain recognized on the exchange and its tax basis in the property received from OMG.

• A) $175,000 gain recognized; $768,000 basis in OMG property
• B) No gain recognized; $768,000 basis in OMG property
• C) $175,000 gain recognized; $943,000 basis in OMG property
• D) None of the above

---

Definitions:

Classical Conditioning

A learning process in which a neutral stimulus becomes associated with a meaningful stimulus and acquires the capacity to elicit similar responses.

Learning

The process of acquiring new understanding, knowledge, behaviors, skills, values, attitudes, and preferences through study, experience, or teaching.

Drug Tolerance

Drug tolerance occurs when a person requires a higher dose of a drug to achieve the same effect due to repeated use.

Conditioning Models

Theoretical models used to explain how behavioral responses are learned and performed in relation to certain stimuli.