Elaine Owns Equipment ($23,000 Basis and $15,000 FMV)and a Building

question 30

Essay

Elaine owns equipment ($23,000 basis and $15,000 FMV)and a building ($136,000 basis and $148,000 FMV),which are used in her business.Elaine uses straight-line depreciation for both assets,which were acquired several years ago.Both the equipment and the building are destroyed in a fire,and Elaine collects insurance proceeds equal to the assets' FMV.
a.What is the tax treatment of these two transactions?
b.Assume that Elaine is only able to collect $3,000 from the insurance company for the equipment loss.What is the tax treatment of the two transactions (assume the basis and insurance reimbursement remain the same for the building).

---

Definitions:

Asterisks

Symbolic characters (*) used in text as pointers to footnotes, omissions, or special meanings.

Footnote Identifiers

These are symbols or numbers placed in the text that refer the reader to additional information or citations located at the bottom of the page or at the end of a chapter or book.

Number Tables

Tables used to organize, display, and analyse numerical data systematically.

Ethically Bound

refers to being obligated to act in ways that are considered morally right and fair within societal or professional standards.