A Factory Building Owned by Amber, Inc

question 20

Multiple Choice

A factory building owned by Amber, Inc. is destroyed by a hurricane. The adjusted basis of the building was $400,000 and the appraised value was $425,000. Amber receives insurance proceeds of $390,000. A factory building is constructed during the nine-month period after the hurricane at a cost of $450,000. What is the recognized gain or loss and what is the basis of the new factory building?

• A) $0 and $450,000.
• B) $0 and $460,000.
• C) ($10,000) and $440,000.
• D) ($10,000) and $450,000.
• E) None of the above.

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Definitions:

Premiums

A designated amount of money paid at regular intervals by an individual or entity for a policy or service, especially in the context of insurance.

Medico-legal Deaths

Pertains to deaths that are investigated by legal authorities to determine the cause and manner, especially when they are unexpected, suspicious, or involve unexplained circumstances.

Autopsy

A pathologist’s medical examination of the organs of the dead body to determine the cause of death.

Practical Experience

Hands-on or direct involvement in activities or work, gaining knowledge and skills through doing rather than theoretical learning.