Lorreta has a manufacturing business. In 2014, her storage building is completely destroyed by fire and she receives $310,000 from her insurance company. She purchased the building for $300,000 in 1995 and has claimed depreciation of $80,000 using the straight-line method. In 2015, she purchases a new storage building at a cost of $290,000.
a.Calculate Lorreta's realized gain or loss.
b.Assuming Lorreta makes an election under the involuntary conversion provision, calculate Lorreta's recognized gain or loss?
c.Assuming Lorreta makes an election under the involuntary conversion provision, what is Lorreta's basis in the new building?

Question

Lorreta has a manufacturing business. In 2014, her storage building is completely destroyed by fire and she receives $310,000 from her insurance company. She purchased the building for $300,000 in 1995 and has claimed depreciation of $80,000 using the straight-line method. In 2015, she purchases a new storage building at a cost of $290,000.
a.Calculate Lorreta's realized gain or loss.
b.​Assuming Lorreta makes an election under the involuntary conversion provision, calculate Lorreta's recognized gain or loss?
c.​Assuming Lorreta makes an election under the involuntary conversion provision, what is Lorreta's basis in the new building?

Quizplus · Accepted Answer

The Answer of Lorreta has a manufacturing business. In 2014, her storage building is completely destroyed by fire and she receives $310,000 from her insurance company. She purchased the building for $300,000 in 1995 and has claimed depreciation of $80,000 using the straight-line method. In 2015, she purchases a new storage building at a cost of $290,000.
a.Calculate Lorreta's realized gain or loss.
b.​Assuming Lorreta makes an election under the involuntary conversion provision, calculate Lorreta's recognized gain or loss?
c.​Assuming Lorreta makes an election under the involuntary conversion provision, what is Lorreta's basis in the new building?

Lorreta Has a Manufacturing Business