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:

Hereditary Nobility

A social class in various countries historically conferred by a monarch or an existing regime, typically involving titles and privileges being passed down through bloodlines.

Ottoman Empire

A vast empire founded at the end of the 13th century in present-day Turkey that expanded to control much of Southeast Europe, Western Asia, and North Africa for over six centuries.

Diplomatic Revolution

Refers to the significant shift in alliances among major European powers in the mid-18th century, particularly between 1756 and 1757, leading to the realignment of diplomatic relations.

1756

The year 1756 is notably remembered for the start of the Seven Years' War, a global conflict that involved most of the great powers at the time.