Sidney, a Calendar Year Taxpayer, Owns a Building (Adjusted Basis

question 104

True/False

Sidney, a calendar year taxpayer, owns a building (adjusted basis $450,000) in Columbus, OH, in which he conducts his retail computer sales business. The building is destroyed by fire on December 12, 2017, and two weeks later he receives insurance proceeds of $600,000. Due to family ties, Sidney decides to move to Columbia, SC. He reinvests all of the insurance proceeds in a building in Columbia where he opens a retail computer sales business on April 2, 2018. By electing § 1033, Sidney has no recognized gain and a basis in the new building of $450,000 ($600,000 cost - $150,000 postponed gain).

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Definitions:

Production Function

A mathematical model or equation that describes the maximum output of a firm, industry, or entire economy for a given set of inputs.

Labor Input

The amount of work effort, measured in hours or workforce size, used in the production of goods and services.

Marginal Product

The extra yield generated from the utilization of an additional unit of a specific input, with all other inputs remaining unchanged.

Specific Input

A specific input in production is one that is exclusively used in the production of a particular good or service, often leading to unique advantages or efficiencies.