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:

Civil Wrongs

Acts or omissions that cause harm or loss to another person, and are the basis for a lawsuit in civil court, distinct from criminal acts.

Specific Performance

A legal remedy that requires a party to fulfill their contractual obligations, rather than just paying damages.

Rare Books

Books considered valuable due to their scarcity, age, historical significance, or other unique features.

Personal Services

Services offered by individuals or businesses which are performed directly for customers' personal needs.