An Office Building with an Adjusted Basis of $320,000 Was

question 48

Multiple Choice

An office building with an adjusted basis of $320,000 was destroyed by fire on December 30,2015.On January 11,2016,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 12,2016,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:

Institutional

Pertaining to established laws, practices, or customs, or to the organization or foundation itself.

Mocking

The act of making fun of someone or something in a cruel or harsh manner, often by copying them in a way that aims to entertain or irritate.

Feedback

Information provided regarding aspects of one's performance or behavior; it is used as a basis for improvement or affirmation.

Bureaucracy

A system of government or business that is characterized by many rules, procedures, and levels of authority, often leading to inefficiency and rigidity.