Kareem's office building is destroyed by fire on April 11,2014. Settlement is reached with the insurance company on November 1,2014 when he receives a check for $900,000. The property had recently been appraised for $920,000. Kareem's adjusted basis in the building was $800,000.
a.What is Kareem's realized gain or loss?
b.Assume Kareem wishes to defer the maximum amount of gain. Indicate:
c.Assume that instead of a fire,the state forces Kareem to sell the property. Indicate how your responses to part b would differ.
Definitions:
Interest Income
Earnings received from deposit accounts or investments through the payment of interest.
Eligible Dividends
Dividends that are designated by a corporation to be eligible for a lower tax rate for the receiver, depending on jurisdiction.
Average Tax Rate
The percentage of total income that goes to taxes, calculated by dividing the total amount of tax paid by the total income.
Taxable Income
The sum of earnings that determines the tax liability of a person or corporation to the state.
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