Bobby used to own several acres of desert land on the outskirts of Palm Springs.

Bobby used to own several acres of desert land on the outskirts of Palm Springs. Hebought the land several years ago for $50,000 as an investment, because he thoughtPalm Springs would expand in the direction of his land and he’d eventually be able tosell it for more. In fact, he was right; and last year, he sold the land to Felicity for$250,000 in cash. Bobby knows a little about tax law, so he suggested to Felicity thattheir written agreement describe the transaction as an “exchange” of his land for hercash. Felicity didn’t care what the agreement said, so long as she didn’t have to pay anymore than $250,000 and received a recordable deed and title insurance when the dealclosed. Which of the following is true with respect to Bobby’s suggestion?







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