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:

Overdue

A term describing a payment not made by its due date or an action not completed by the scheduled time.

Installment Payment

A method of payment where the total cost is divided into multiple scheduled payments over a period.

Unauthorized Signature

A signature placed on a document by someone not authorized by the proper entity or individual, potentially leading to legal issues.

Dishonored

refers to a financial instrument, such as a check or bill of exchange, that has been refused acceptance or payment.