An Office Building with an Adjusted Basis of $320,000 Was

question 48

Multiple Choice

An office building with an adjusted basis of $320,000 was destroyed by fire on December 30,2015.On January 11,2016,the insurance company paid the owner $450,000.The fair market value of the building was $500,000,but under the co-insurance clause,the insurance company is responsible for only 90 percent of the loss.The owner reinvested $410,000 in a new office building on February 12,2016,that was smaller than the original office building.What is the recognized gain and the basis of the new building if § 1033 (nonrecognition of gain from an involuntary conversion) is elected?

• A)$0 and $320,000.
• B)$0 and $410,000.
• C)$40,000 and $320,000.
• D)$130,000 and 410,000.
• E)None of the above.

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Definitions:

Peroxisomes

Organelles found in virtually all eukaryotic cells that break down fatty acids and detoxify certain chemicals.

Degrade Lipids

The biochemical process of breaking down lipids into smaller molecules, often through the action of enzymes.

Membranous Sacs

Membranous sacs refer to various types of enclosed, membrane-bound structures within cells that perform specific functions, such as vesicles or lysosomes.

Kinesin

See microtubule-associated proteins (MAPs).