Teresas manufacturing plant is destroyed by fire. The plant has an adjusted basis of $270,000, and Teresa

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Teresa’s manufacturing plant is destroyed by fire. The plant has an adjusted basis of $270,000, and Teresa receives insurance proceeds of $410,000 for the loss. Teresa reinvests $420,000 in a replacement plant within 2 years of receiving the insurance proceeds. 

a. Calculate Teresa’s recognized gain if she elects to utilize the involuntary conversion provision. 

b. Calculate Teresa’s basis in the new plant.

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Income Tax Fundamentals 2019

ISBN: 9781337703062

37th Edition

Authors: Gerald E. Whittenburg, Steven Gill

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