Lucinda, a Calendar Year Taxpayer, Owned a Rental Property with an Adjusted

question 136

Essay

Lucinda, a calendar year taxpayer, owned a rental property with an adjusted basis of $312,000 in a major coastal city. Her property was condemned by the city government on October 12, 2017. In order to build a convention center, Lucinda eventually received qualified replacement property from the city government on March 9, 2018. This new property has a fair market value of $410,000.
a.What is Lucinda's recognized gain or loss on the condemnation?
b.What is her adjusted basis for the new property?
c.If, instead of receiving qualifying replacement property, Lucinda was paid $410,000, what is the latest date that she can acquire qualifying replacement property?

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Definitions:

Final Payment

The last payment made to settle a debt or financial obligation, typically at the end of a loan term.

Monthly Payments

Payments made every month towards the balance of a loan, mortgage, or other long-term financial obligation.

Principal Balance

The original amount of money lent or invested, before any interest or profit is added to it or any payments are made.

Amortized

Definition: The process of spreading out a loan into a series of fixed payments over time.