Reference no: EM133035536

Question - Mr. X owned an apartment building. He exchanged it for Ms. Y's mansion, which Mr. X intended to, and did, remodel and use as his office for his accounting prac-tice (Schedule C).

Here are some additional facts:

Mr. X's adjusted basis in his apartment building was $1,400,000.

Ms. Y's adjusted basis in her mansion was $2,250,000.

No cash or other / additional consideration passed in either direction in connection with the exchange, and neither property was encumbered by any debt.

On the county property tax rolls, Mr. X's apartment building was listed at a value of $3.25 million, Ms. Y's mansion at $3.6 million.

Ms. Y actually lived in her mansion; it was her personal residence only.

1. If Mr. X was your client, would you advise him that he could treat this transaction as a good § 1031 LKE? Why or why not?

2. What was Mr. X's tax basis in the mansion immediately after the exchange was completed?