Patty's Factory Building,which Has an Adjusted Basis of $475,000,is Destroyed

question 95

Essay

Patty's factory building,which has an adjusted basis of $475,000,is destroyed by fire on April 8,2014.Insurance proceeds of $500,000 are received on June 1,2014.She has a new factory building constructed for $490,000,which she occupies on October 1,2014.Assuming Patty's objective is to minimize the tax liability,calculate her recognized gain or loss and the basis of the new factory building.

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Definitions:

Revolving Credit Agreement

A legal financial contract between a lender and a borrower that allows the borrower to access funds up to a pre-approved credit limit, repay, and withdraw again.

Commercial Paper

An unsecured, short-term debt instrument issued by corporations, typically for financing accounts receivable and inventories.

Financing

Financing is the process of providing funds for business activities, making purchases, or investing.

Commitment Fees

Fees charged by lenders to a borrower for an unused or untapped credit line, ensuring the lender retains availability of the funds.