Edith's Manufacturing Plant Is Destroyed by Fire on the Afternoon

question 126

Essay

Edith's manufacturing plant is destroyed by fire on the afternoon of November 3, 2018. The adjusted basis is $800,000. The insurance company offers a settlement of $700,000. After protracted negotiations, Edith receives $825,000 on June 9, 2019. Edith is a fiscal year taxpayer whose tax year ends on June 30th. What is the latest date that Edith can invest the proceeds in qualifying replacement property and elect to defer the gain under § 1033?

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Definitions:

Future Earnings

The projected income a company or individual is expected to generate in upcoming periods.

Investing Human Capital

The process of improving the workforce's skills and knowledge through education, training, and experience to enhance productivity and economic value.

Present Discounted Value

The current value of a future sum of money or stream of cash flows given a specified rate of return, used in time value of money calculations.

Direct Costs

Expenses that can be directly traced to the production of a specific good or service, such as materials and labor.