On July 2, 2018, a Tornado Destroyed an Asset Owned

question 67

True/False

On July 2, 2018, a tornado destroyed an asset owned by Leigh Inc., a calendar year taxpayer. Leigh's adjusted tax basis in the asset was $22,700, and the reimbursement from its property insurance company was $35,000. If Leigh wants to defer recognizing its $12,300 realized gain, it must replace the asset no later than December 31, 2019.

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Definitions:

Useful Life

The estimated period over which a fixed asset is expected to be usable by the company, affecting its depreciation calculation.

Depreciation Percentage

The rate at which a company depreciates an asset, expressed as a percentage of its total value.

Double-Declining-Balance

An accelerated method of depreciation which doubles the usual rate of depreciation of assets, allowing for faster write-offs.

Units-Of-Output

A depreciation method that allocates the cost of an asset over its useful life based on the units it produces, reflecting the asset's wear and tear more accurately.