On June 2, 2015, a tornado destroyed the building in which FF operated a fast-food franchise. FF’s adjusted basis in the building was $214,700. In each of the following cases, determine FF’s recognized gain or loss on this property disposition and FF’s basis in the replacement building. Assume that FF would elect to defer gain recognition when possible.
a. On September 8, 2015, FF received a $250,000 reimbursement from its insurance company. On August 10, 2016, it completed construction of a replacement building for a total cost of $300,000.
b. On September 8, 2015, FF received a $250,000 reimbursement from its insurance company. On August 10, 2016, it completed construction of a replacement building for a total cost of $235,000.
c. On September 8, 2015, FF received a $200,000 reimbursement from its insurance company. On August 10, 2016, it completed construction of a replacement building for a total cost of $300,000.