Williams Owned an Office Building (But Not the Land) That

question 97

Essay

Williams owned an office building (but not the land) that was destroyed by a fire. The building was insured and Williams has a $156,000 gain because his insurance recovery exceeded his adjusted basis for the building. Williams may replace the building. Williams had taken $145,000 of depreciation on the building, has no § 1231 lookback loss, has no other § 1231 transactions for the year, and has no Schedule D transactions for the year. What is the final nature of Jamison's gain for the year and what tax rate(s) apply to the gain if:
(a) He does reinvest the insurance proceeds?
(b) If he doesn't reinvest the insurance proceeds?

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Definitions:

Bulla

A large fluid-filled blister that appears on the surface of the skin, which can result from burns, infections, or other skin conditions.

Skin Lesion

An area of damaged or abnormally altered tissue on the skin, which could be a rash, mole, tumor, or sore.

Increase Muscle Mass

The process of gaining muscle size and strength through physical activity, nutrition, and adequate recovery.

Hirsutism

An excessive growth of dark or coarse hair in a male-like pattern on a woman's face, chest, and back.