Old MacDonald had a farm. And on his farm, he had a barn that was destroyed in an earthquake. The barn was built for $268,000, and $84,700 of depreciation deductions had been taken. His insurance proceeds were $559,000. The new barn was built 13 months after the earthquake for $615,000 because it was much larger and nicer than the old barn.

1. What is the amount of MacDonald’s realized gain?
2. What is the amount of MacDonald’s recognized gain?
3. What provision of the tax code allows for non-recognition of gain?
4. What are the rules for that provision?
5. What is Old MacDonald’s basis in his new barn?

Answer rating: 100% (QA)

Quiz 1 MacDonalds realized gain is 246300 Depreciation deductions taken 84700 Insurance proceeds 559... View the full answer