In March, a Flood Completely Destroyed Three Delivery Vans Owned

question 3

Multiple Choice

In March, a flood completely destroyed three delivery vans owned by Totle Inc. Totle's adjusted tax basis in the vans was $48,900. Totle received a $90,000 reimbursement from its property insurance company, and on September 8, it purchased one new delivery van for $70,000. Compute Totle's recognized gain on loss on the involuntary conversion and its tax basis in the new van.

• A) No recognized gain or loss; $48,900 basis in the van
• B) $20,000 recognized gain; $70,000 basis in the van
• C) $20,000 recognized gain; $48,900 basis in the van
• D) None of these choices are correct

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Definitions:

Government Regulation

The act of controlling business operations, activities, or market entries through laws and rules set by the government to protect public interests.

Economic Expansion

A phase of the business cycle during which the economy grows, characterized by increased output, employment, and consumer spending.

Laissez-faire Approach

An economic philosophy of minimal governmental intervention in the market and the operations of businesses.

Technological Progress

Advances in technology that improve production efficiency, product quality, and innovation across sectors.