MacKenzie owns a boat rental business. During the current year, a tidal wave sweeps through the harbor where she keeps her boats anchored. Four boats are totally destroyed, but the rest of the rental fleet escapes serious damage. MacKenzie replaces the 4 boats within 6 months of the tidal wave. Details on each boat destroyed and the cost of its replacement are as follows:

What is the realized gain or loss on each of the boats?
What is the minimum amount of gain or loss that must be recognized on each of the boats?
Assuming that MacKenzie elects to recognize the minimum amount of gain or loss on each boat, what is the basis of each replacementboat?

Transcribed Image Text:

Adjusted Basis Replacement Cost Insurance Boat Proceeds 50,000 18,000 48,000 136,000 75,000 Yacht Speedboat Fishing boat $150,000 95,000 S 80,000 82,000 $102,000 $142,000 $112,000