Patty's Factory Building, Which Has an Adjusted Basis of $475,000

question 150

Essay

Patty's factory building, which has an adjusted basis of $475,000, is destroyed by fire on April 8, 2018. Insurance proceeds of $500,000 are received on June 1, 2018. She has a new factory building constructed for $490,000, which she occupies on October 1, 2018. Assuming Patty's objective is to minimize the tax liability, calculate her recognized gain or loss and the basis of the new factory building.

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Definitions:

World Trade Center

A large complex of office buildings in Lower Manhattan, New York, known for being the site of a terrorist attack on September 11, 2001.

Repression

Repression is a psychological defense mechanism where unpleasant thoughts, feelings, or desires are unconsciously excluded from consciousness.

First Years Of Life

The initial period of a person's life, typically referring to the time from birth to age three, crucial for development.

Defense Mechanism

Psychological strategies brought into play by individuals, unconsciously, to protect themselves from anxiety or to provide a refuge from a situation with which they cannot currently cope.