In June, a Fire Completely Destroyed Office Furniture Owned by W&S

question 93

Multiple Choice

In June, a fire completely destroyed office furniture owned by W&S Inc. W&S's adjusted tax basis in the furniture was $17,040. W&S received a $15,000 reimbursement from its property insurance company, and on August 8, it paid $16,000 to replace the furniture. Compute W&S's recognized gain or loss on the involuntary conversion and its tax basis in the new furniture.

• A) No recognized gain or loss; $18,040 basis in the furniture
• B) $2,040 recognized loss; $16,000 basis in the furniture
• C) No recognized gain or loss; $13,960 basis in the furniture
• D) None of the above.

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Definitions:

GST

Goods and Services Tax, a value-added tax imposed on most goods and services sold for domestic consumption.

PST

PST stands for Provincial Sales Tax, which is a tax levied by individual provinces in Canada on the sale of goods and services.

Property Taxes

It is a levy imposed by a government on a property owner, usually based on the value of the property.

Mill Rate

The amount of tax payable per dollar of the assessed value of property, used in calculating property taxes.