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

question 20

Multiple Choice

An office building with an adjusted basis of $320,000 was destroyed by fire on December 30,2014.On January 11,2015,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 12,2015,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 these.

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Definitions:

Placenta

An organ that develops in a female's uterus during pregnancy, providing oxygen and nutrients to the growing baby while removing waste products from the baby's blood.

Gestation Period

The time span from conception to birth in mammals, typically varying based on species.

Fetal

Pertaining to a fetus, which is a developing baby from the end of the eighth week after conception until birth.

Prenatal Development

The process of growth and development within the womb from conception to birth.