Ed Owns a Racehorse with a $600,000 Basis Used for Breeding

question 35

Multiple Choice

Ed owns a racehorse with a $600,000 basis used for breeding purposes.The racehorse is killed in a tornado,and Ed collects $1,000,000 from the insurance company.He purchases another horse for $550,000.What is the amount of gain recognized on the transaction?

• A)$0
• B)$50,000
• C)$350,000
• D)$400,000

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