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The Smiths Owned and Occupied Their Principal Residence,with an Adjusted

question 98

Essay

The Smiths owned and occupied their principal residence,with an adjusted basis of $250,000,for ten years.The house is destroyed by a tornado and the Smiths receive insurance proceeds of $800,000.Six months later,they purchase another residence for $850,000.
a.What is the amount of gain the Smiths must recognize?
b.What is the basis of the new residence?


Definitions:

Gratuities

Items or services given without charge, often as a form of gift or tip, typically in gratitude or for promotional purposes.

Police

Law enforcement officers responsible for maintaining public order, enforcing the law, and providing services to enhance community safety.

Power

The ability or capacity to exert influence or control over others or the environment.

Freedom

The power or right to act, speak, or think as one wants without hindrance or restraint.

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