A warehouse used by Vick Vanderhouse in his business was condemned by the state. The state awarded Vick $470,000. Vick's adjusted basis in the warehouse was $390,000. Vick spent $95,000 to renovate an old barn that he owned in order to convert it to a warehouse, and he also purchased a new warehouse for $345,000 within one year. Both warehouses will be used to house the equipment previously held in the state condemned warehouse.

a. What amount should Vick report as gain or loss on the condemnation if an election is made under Code Sec. 1033?

b. What is Vick's basis in his new warehouses?

c. If the condemnation award was $360,000, what would be Melvin's recognized gain or loss and the basis in the two warehouses?

d. What would be Vick's recognized gain if the price of a single new warehouse had been $490,000? What would the basis be?

e. What would be Vick's recognized gain if the cost of the single new warehouse was $370,000? What would be the basis of the new warehouse?

Answer rating: 100% (QA)

a If an election is made under Code Sec 1033 Vick would report a gain of 8... View the full answer