An Office Building with an Adjusted Basis of $320,000 Was

question 158

Multiple Choice

An office building with an adjusted basis of $320,000 was destroyed by fire on December 30, 2012.On January 11, 2013, the insurance company paid the owner $450,000.The fair market value of the building was $500,000, but under the co-insurance clause, the insurance company is responsible for only 90 percent of the loss.The owner reinvested $410,000 in a new office building on February 12, 2013, that was smaller than the original office building.What is the recognized gain and the basis of the new building if § 1033 (nonrecognition of gain from an involuntary conversion) is elected?

• A)$0 and $320,000.
• B)$0 and $410,000.
• C)$40,000 and $320,000.
• D)$130,000 and 410,000.
• E)None of the above.

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Definitions:

Reinforcements

In behavioral psychology, any event that strengthens or increases the likelihood of a behavior repeating.

Systematic Desensitization

A therapeutic method used to reduce phobic or anxiety responses through gradual exposure to the feared object or situation coupled with relaxation techniques.

Gradual Association

The process of forming connections or associations between stimuli or ideas over time, often leading to learned behaviors or understandings.

Operant Conditioning

A learning process through which the strength of a behavior is modified by reward or punishment.