Prince Corp. owns a warehouse with an adjusted basis of $400,000. The warehouse is destroyed by an earthquake. The insurance company paid Prince $750,000 as compensation for the loss on the warehouse. Ten months after the loss, Prince uses the insurance proceeds and other funds to acquire a new warehouse for $682,000 and equipment for its factory at a cost of $90,000. Assuming that Prince elects to defer as much of the gain on the conversion as possible, what is its recognized gain, its basis in the new warehouse, and its basis in the equipment it acquired?

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Part 1 Amount paid by insuance company 750000 Adjus... View the full answer