Cindy Exchanges Investment Real Estate with Russell

question 1

Multiple Choice

Cindy exchanges investment real estate with Russell. Cindy purchased her realty two years ago for $280,000, and it is encumbered by a mortgage of $100,000 and has a fair market value of $320,000 when exchanged. Russell paid $80,000 cash for his property in 1999 and it is appraised at $150,000 on the day of the exchange. Russell assumes the debt on his new land and pays Cindy enough in cash to balance the exchange. What is Cindy's recognized gain (loss) on the exchange?

• A)$-0-
• B)$40,000
• C)$100,000
• D)$170,000

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Definitions:

Government Intervention

Regulatory actions taken by a government to affect or influence a specific sector of its economy, often to correct market failures or promote social welfare.

Allocative Efficiency

Refers to a market situation where resources are apportioned in the most efficient manner, allowing for the optimal combination of goods and services production to meet consumer preferences.

Consumer Surplus

The variance between the aggregate sum consumers are prepared and capable of spending for a product or service and the aggregate sum they end up paying.

Producer Surplus

The difference between the amount producers are willing to accept for a good or service and the actual amount they receive following trade.