Sam's Office Building with an Adjusted Basis of $750,000 and a Fair

question 25

Multiple Choice

Sam's office building with an adjusted basis of $750,000 and a fair market value of $900,000 is condemned on November 30, 2017. Sam is a calendar year taxpayer. He receives a condemnation award of $875,000 on March 1, 2018. He builds a new office building at a cost of $845,000 which is completed and paid for on December 31, 2020. What is Sam's recognized gain on receipt of the condemnation award and basis for the new office building assuming his objective is to minimize gain recognition?

• A)$0; $720,000.
• B)$30,000; $750,000.
• C)$30,000; $845,000.
• D)$150,000; $750,000.
• E)None of the above.

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Definitions:

Open Market

A market with no barriers to free market activity, where any buyer or seller can trade freely.

Buying and Selling Activity

Transactions involving the purchase and sale of goods and services, analyzed to assess a company's operational performance.

Controlling Interest

A significant shareholding in a corporation that provides the shareholder with the ability to influence or control decision-making processes.

Carrying Value

The recorded net value of an asset or liability on a company's balance sheet, considering factors like depreciation or amortization.