An Office Building Owned by Abby and Used in Her

question 79

Essay

An office building owned by Abby and used in her business was destroyed in a fire.Abby's adjusted basis in the building was $145,000 and its FMV was $180,000.Abby filed an insurance claim and she was reimbursed $160,000.In that same year,Abby invested $150,000 of the insurance proceeds in another business building.
a.Assume Abby made the proper election with regard to the involuntary conversion.What is the amount of gain to be recognized by Abby?
b.What is Abby's basis in the new building?

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Definitions:

Posi-Drive Screw

A type of screw designed with a unique drive system that reduces the risk of cam-out and increases the efficiency of torque transmission.

Phillips Screw

A type of screw with a cross-shaped slot on its head, designed by Henry F. Phillips.

Higher Torque

Refers to a greater twisting force typically achieved by an engine or motor, resulting in increased ability to perform work, especially in moving heavier loads.

Standard Micrometer

A precision measuring instrument used to measure small distances, thicknesses, or diameters with high accuracy, typically in machining and engineering.