On July 2, 2018, a tornado destroyed an asset owned by Leigh Inc., a calendar year taxpayer. Leigh's adjusted tax basis in the asset was $22,700, and the reimbursement from its property insurance company was $35,000. If Leigh wants to defer recognizing its $12,300 realized gain, it must replace the asset no later than December 31, 2019.

Question

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Leigh has until December 31, 2020, to replace the asset.

On July 2, 2018, a Tornado Destroyed an Asset Owned