Joyce's Office Building Was Destroyed in a Fire (Adjusted Basis

question 221

Multiple Choice

Joyce's office building was destroyed in a fire (adjusted basis of $350,000? fair market value of $400,000) . Of the insurance proceeds of $360,000 she receives, Joyce uses $310,000 to purchase additional inventory and invests the remaining $50,000 in short-term certificates of deposit. She received only $360,000 because of a co-insurance clause in her insurance policy. What is Joyce's recognized gain or loss?

• A) $0
• B) $10,000 loss
• C) $10,000 gain
• D) $40,000 gain
• E) None of the above

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Definitions:

Uniform Transfer to Minors Act

The Uniform Transfers to Minors Act (UTMA) is a law that allows assets to be transferred or gifted to minors without the need for a formal trust.

Custodianship Terminate

The process by which a custodial arrangement, where one party holds property or assets for the benefit of another, comes to an end.

Abandoned Shipwreck Act

A U.S. federal law that asserts state ownership and preservation rights over abandoned shipwrecks located in its waters.

Law of Finds

A legal doctrine that governs the rights to ownership of property that has been unclaimed and discovered.