The Smiths owned and used their principal residence, with an adjusted basis of $250,000, for ten years. The house is destroyed by a tornado and the Smiths receive insurance proceeds of $800,000. Six months later, they purchase another residence for $850,000.

a. What is the amount of gain the Smiths must recognize?

b. What is the basis of the new residence?

Answer rating: 100% (QA)

Answer a As per this analysis if residential house is detroyed by tor... View the full answer