On May 13, 2018, a Flood Destroyed the Building in Which

question 83

Essay

On May 13, 2018, a flood destroyed the building in which SDF Inc. manufactured its product. SDF's adjusted tax basis in the building was $984,000. On November 29, 2018, SDF received a $1.2 million reimbursement from its casualty insurance company.
In each of the following cases, compute SDF's recognized gain on this involuntary conversion and its initial basis in the replacement property.
a. On June 2, 2019, SDF completed construction of a replacement building for $1.3 million.
b. On February 18, 2021, SDF paid $1.3 million to purchase a replacement building.
c. On August 30, 2020, SDF paid $1.1 million to purchase a replacement building.

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Definitions:

APR

Annual Percentage Rate; a measure that reflects the cost of borrowing money or the return on an investment, including interest and other associated fees, shown as a yearly rate.

Finance Charge

A fee representing the cost of credit or the cost of borrowing money, including interest and other related charges.

Car Loan

A financial agreement in which a lender provides funds to a borrower for the purpose of purchasing a vehicle, to be repaid with interest over a set period.

FICO Score

A score that summarizes the probability that a debtor will pay a debt and is a reliable way that creditors judge credit worthiness.