Kristi Had a Business Building Destroyed in an Earthquake

question 99

Essay

Kristi had a business building destroyed in an earthquake. The old building was purchased for $250,000, and $80,000 of depreciation deductions had been taken. Her insurance proceeds were $550,000. Although the replacement property was much larger and nicer than her old building, Kristi's new property qualified as replacement property. She acquired the new property 13 months after the earthquake for $620,000. What is the amount of Kristi's realized gain and recognized gain and the basis in her new property?

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Definitions:

Drive-Reduction

A theory in psychology that posits behavior is motivated by the desire to reduce internal drives related to basic physiological needs.

Homeostatic

Pertaining to homeostasis, the process by which living organisms regulate internal conditions to maintain a stable, constant state.

Disequilibrium

Disequilibrium refers to a lack of balance or stability in either a physical, psychological, or economic context, often leading to a change or correction.

Needs

refer to the basic requirements or essentials necessary for an individual's well-being, including physical, emotional, and social aspects.