Daisy's Warehouse Is Destroyed by a Tornado

question 20

Short Answer

Daisy's warehouse is destroyed by a tornado.The warehouse has an adjusted basis of $130,000 when destroyed.Daisy receives an insurance reimbursement check for $150,000 and immediately reinvests $120,000 of the proceeds in a new warehouse.What are Daisy's recognized gain or (loss)and her basis in the replacement warehouse?
$$\begin{array} { l l l } & { \text { Recognized } } & \text { New } \\& \underline { \text { Gain (Loss) } }& \underline { \text { Basis }} \\\text { a. } & \$-0- & \$ 120,000 \\\text { b. } & \$ 20,000 & \$ 120,000 \\\text { c. } &\$ 30,000 & \$ 110,000 \\\text { d. } & \$ 10,000 & \$ 130,000 \\\text { e. } & \$ 20,000 & \$ 100,000\end{array}$$

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Definitions:

Complex Economy

An economic system featuring a vast array of goods and services, multiple levels of production, and interconnected markets and actors.

Labor Earnings

Income received by workers for their labor services, including wages, salaries, and other forms of compensation.

Government Policy

Actions or inactions chosen by government officials to address specific public issues, ranging from economic regulations to social welfare programs.

Natural Rate

Often refers to the natural rate of unemployment, which is the level of unemployment consistent with a stable rate of inflation, or the equilibrium rate unaffected by short-term fluctuations.