A Flood Destroys Owen's Building That Cost $100,000 in 2007

question 11

Short Answer

A flood destroys Owen's building that cost $100,000 in 2007, which has an adjusted basis of $80,000. Owen's insurance company reimburses him $125,000 for his loss. Owen promptly reconstructs the building for $115,000. What is the minimum amount of gain that Owen must recognize and his basis in the new building?

---

Definitions:

Hourly Wage

A rate an employer agrees to pay a worker for each hour worked.

Federal Budget Deficit

The gap between what the U.S. government spends and what it collects in revenues over a fiscal year, leading to borrowing to cover the shortfall.

Cheap Land

Refers to land that is available for purchase at a relatively low cost, often due to location, quality, or other factors affecting its desirability.

Immigration

The act of moving to a foreign country to live permanently.