An Office Building with an Adjusted Basis of $320,000 Was

question 177

Multiple Choice

An office building with an adjusted basis of $320,000 was destroyed by fire on December 30, 2014. On January 11, 2015, 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, 2015, 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.
• E) None of the above.

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Definitions:

Nonverbal Signals

Forms of communication without words, such as gestures, body language, posture, tone of voice, and facial expressions.

Layoff

The temporary or permanent dismissal of employees from their job due to economic downturns, restructuring, or other organizational changes.

CEO

Chief Executive Officer, the highest-ranking person in a company or institution, ultimately responsible for making managerial decisions.

Verbal Communication

The use of spoken or written words to convey a message or exchange information between individuals or groups.