Real Property Where Paul Peterson's Warehouse Is Located Is Completely

question 2

Multiple Choice

Real property where Paul Peterson's warehouse is located is completely destroyed by fire on November 23, 2012. Paul purchased the warehouse in 2006 for $800,000; its adjusted basis in the warehouse is $420,000. He receives $1 million from the insurance company on March 5, 2013. What amount must Paul reinvest in qualified replacement property and be able to defer the entire $580,000 realized gain from the condemnation?

• A) $420,000.
• B) $520,000.
• C) $800,000.
• D) $1,000,000.

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Definitions:

Deposit

An amount of money placed into an account or given to someone as a partial payment or security for the purchase of something.

Check Register

A record book or digital log used to track checks written, deposits made, and current balance of a bank account.

Cash Balance

The amount of currency and liquid instruments in a company's possession that can be readily used for transactions.

Check

A written order directing the bank to pay a certain sum to a designated party.