Theresa Owns a Yacht That Is Held for Personal Use

question 98

Essay

Theresa owns a yacht that is held for personal use and has a $100,000 basis.The yacht is destroyed by a storm and Theresa collects $120,000 from the insurance company.She purchases a new $150,000 yacht for personal use and elects to defer any gain on the transaction.What is the basis of the new yacht?

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Definitions:

Net Markdowns

The reduction in the selling price of goods, subtracted from the original or previous selling price, often to clear surplus inventory.

Understated

Describes an amount reported lower than it actually is, either in financial statements or any other reporting context.