Kareem's Office Building Is Destroyed by Fire on April 11,2014

question 49

Essay

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.

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Definitions:

Reward

A stimulus or event that increases the likelihood of the behavior that led to it being repeated in the future.

Unconditioned Frustration Response

An innate emotional reaction to the blocking of a goal-directed behavior without prior conditioning.

Amsel

A reference to Abram Amsel, a psychologist known for his work on the frustration theory of learning.

Escape Behavior

An action taken to terminate an ongoing, unpleasant stimulus, effectively allowing an individual to avoid discomfort.