Sam's Office Building with an Adjusted Basis of $750,000 and a Fair

question 25

Multiple Choice

Sam's office building with an adjusted basis of $750,000 and a fair market value of $900,000 is condemned on November 30, 2017. Sam is a calendar year taxpayer. He receives a condemnation award of $875,000 on March 1, 2018. He builds a new office building at a cost of $845,000 which is completed and paid for on December 31, 2020. What is Sam's recognized gain on receipt of the condemnation award and basis for the new office building assuming his objective is to minimize gain recognition?

• A)$0; $720,000.
• B)$30,000; $750,000.
• C)$30,000; $845,000.
• D)$150,000; $750,000.
• E)None of the above.

---

Definitions:

Fair Value

A measurement of the price at which an asset or liability could be exchanged in an orderly transaction between market participants at the measurement date.

Held-To-Maturity Securities

Held-to-maturity securities are financial assets purchased with the intent and ability to hold them until a specified maturity date, typically including certain kinds of bonds.

Fair Market Value

An estimate of the market value of a property, assuming that both buyer and seller are knowledgeable, willing, and under no pressure to transact.

Interest Revenue

Income earned from lending money or depositing funds into interest-bearing accounts.