Final answer:
A taxpayer performing an exchange of office buildings—one held as an investment asset and the other for business use—engages in a transaction with both financial and non-financial aspects. The first building represents potential for capital gains, while the second offers non-financial return through usage in the business and potential future financial return if sold at a profit.
Step-by-step explanation:
When a taxpayer exchanges an office building held as an investment asset for an office building to be used in her business, this transaction involves aspects of both financial and non-financial investment. The initial office building represents a financial investment that could generate capital gains, which is a form of financial return. On the other hand, the new office building acquired for business purposes will provide non-financial returns in the form of 'housing services' since it becomes a place where business operations are conducted. Additionally, if the taxpayer decides to sell the new office building in the future, there is the potential for a capital gain, which again represents a financial return on the investment.
It is important for the taxpayer to consider that the reasons for holding each building are different, and this can affect taxation and how the properties are treated for accounting and tax purposes. Investment in real estate, be it for business use or as an investment asset, carries with it implications for capital gains, asset depreciation, and other tax-related considerations.