An Office Building Owned by Abby and Used in Her

question 79

Essay

An office building owned by Abby and used in her business was destroyed in a fire.Abby's adjusted basis in the building was $145,000 and its FMV was $180,000.Abby filed an insurance claim and she was reimbursed $160,000.In that same year,Abby invested $150,000 of the insurance proceeds in another business building.
a.Assume Abby made the proper election with regard to the involuntary conversion.What is the amount of gain to be recognized by Abby?
b.What is Abby's basis in the new building?

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Definitions:

Average Precipitation

The mean amount of rain, snow, or other forms of water falling to the ground in a given area over a specified period.

Average Temperature

A calculated central value of a set of temperatures over a specific period, giving an overall indication of climate.

Boreal Forests

Coniferous forest regions located in the Northern Hemisphere, characterized by their adaptation to cold climates and significant contributions to Earth's carbon cycle.

Coniferous Trees

Trees that bear cones and evergreen needle-like or scale-like leaves, including pines, spruces, and firs.