Lily Exchanges a Building She Uses in Her Rental Business

question 77

Multiple Choice

Lily exchanges a building she uses in her rental business for a building owned by Kendall, her brother, which she will use in her rental business.The adjusted basis of Lily's building is $120,000 and the fair market value is $170,000.Which of the following statements is correct?

• A)Lily's recognized gain is $50,000 and her basis for the building received is $120,000.
• B)Lily's recognized gain is $50,000 and her basis for the building received is $170,000.
• C)Lily's recognized gain is $0 and her basis for the building received is $120,000.
• D)Lily's recognized gain is $0 and her basis for the building received is $170,000.
• E)None of the above is correct.

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Definitions:

Promissory Estoppel

A legal principle that prevents a party from withdrawing a promise made when the other party has reasonably relied on that promise to their detriment.

Statute of Frauds

A legal principle requiring certain types of contracts to be in writing and signed to be enforceable.

Oral Contract

A verbal agreement between parties that is legally binding, though more difficult to enforce than written contracts due to the lack of physical evidence.

Voidable

A transaction or agreement that is legally valid but may be annulled or voided at the discretion of one of the parties involved.