Jonah Owned a Rental Building (But Not the Land)that Was

question 47

Essay

Jonah owned a rental building (but not the land)that was destroyed by a fire.The building was insured and Jonah has a $66,000 gain because his insurance recovery exceeded his adjusted basis for the building.Jonah does not intend to replace the building.Jonah had taken $45,000 of depreciation on the building,has no § 1231 lookback loss,has no other § 1231 transactions for the year,and has no Schedule D transactions for the year.What is the final nature of Jonah's gain for the year and what tax rate(s)apply to the gain?

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Definitions:

Additive Inverse

The number that when added to the original number, yields zero.

Multiplicative Inverse

A number which, when multiplied by the original number, results in one. It's often referred to as the reciprocal.

Compounded Monthly

A term used in finance to describe a process where interest is added to the principal balance of an investment or loan each month, and future interest accumulations are based on the new balance.

Interest

The cost of borrowing money or the return on investment, calculated as a percentage of the principal amount over a period.