Elaine Owns Equipment ($23,000 Basis and $15,000 FMV)and a Building

question 30

Essay

Elaine owns equipment ($23,000 basis and $15,000 FMV)and a building ($136,000 basis and $148,000 FMV),which are used in her business.Elaine uses straight-line depreciation for both assets,which were acquired several years ago.Both the equipment and the building are destroyed in a fire,and Elaine collects insurance proceeds equal to the assets' FMV.
a.What is the tax treatment of these two transactions?
b.Assume that Elaine is only able to collect $3,000 from the insurance company for the equipment loss.What is the tax treatment of the two transactions (assume the basis and insurance reimbursement remain the same for the building).

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Definitions:

Cognitive Assessment

The measurement and evaluation of an individual's mental functions and capabilities, often used to identify areas of cognitive strength and weakness.

Temporality

A term used in conjunction with cognitive-behavioral assessment. The temporal dimension refers to the time the thoughts were assessed relative to when they actually occurred.

Cognitive Restructuring

A global term used to describe cognitive-behavior modification techniques that focus on identifying and altering individuals’ irrational beliefs and negative self statements or thoughts.

Cognitive Assessment

The process of evaluating an individual's mental processes, such as memory, attention, and problem-solving abilities.