An office building with an adjusted basis of $320,000 was destroyed by fire on December 30, 2015.
Question:
An office building with an adjusted basis of $320,000 was destroyed by fire on December 30, 2015. On January 11, 2016, the insurance company paid the owner $450,000. The fair market value of the building was $500,000, but under the co-insurance clause, the insurance company is responsible for only 90 percent of the loss. The owner reinvested $410,000 in a new office building on February 12, 2016, that was smaller than the original office building. What is the recognized gain and the basis of the new building if § 1033 (nonrecognition of gain from an involuntary conversion) is elected?
a. $0 and $320,000.
b. $0 and $410,000.
c. $40,000 and $320,000.
d. $130,000 and 410,000.
South Western Federal Taxation 2014 Comprehensive Volume
ISBN: 9781285180922
37th edition
Authors: William H. Hoffman, David M. Maloney, William A. Raabe, James C. Young