An Office Building with an Adjusted Basis of $320,000 Was

question 121

Multiple Choice

An office building with an adjusted basis of $320,000 was destroyed by fire on December 30, 2017. On January 11, 2018, 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, 2018, 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:

Business

Business encompasses the activities related to the production, distribution, and sale of goods and services with the aim of earning profits.

Big Data

Big Data refers to extremely large data sets that may be analyzed computationally to reveal patterns, trends, and associations, especially relating to human behavior and interactions.

Volume

The quantity or amount of something, often used to describe the size, capacity, or mass of an object or the loudness of a sound.

Velocity

The speed of something in a given direction, often used in physics to describe motion but can extend to describe the pace of change in various contexts.