A & C Company has insured its business with two different insurance companies, who were later determined to be related entities. A & C was offered $500,000 by one insurance company in 2002 for the loss of a building (with an adjusted basis of $40,000) to the fire under the condition that the other policy is surrendered without filing a claim. The coverage under the two policies is different. After further consideration, in 2003, A & C decided to accept $550,000 on the first policy and surrender the second policy. Assuming that reinvesting the proceeds was not an option, should A & C accrue the $460,000 of gain on its 2002 return?

Answer rating: 100% (QA)

since a loss has occurred and the policy of AC c... View the full answer