Fundamentals of Taxation 2011 4th Edition by Ana Cruz, Debra Prendergast, Dan Schisler, Michael Deschamps

Exercise 8

Jessica's office building is destroyed by fire on November 15, 2010. The adjusted basis of the building is $410,000. She receives insurance proceeds of $550,000 on December 12, 2010.
a. Calculate her realized and recognized gain or loss for the replacement property if she acquires an office building in December 2010 for $550,000.
b. Calculate her realized and recognized gain or loss for the replacement property if she acquires an office building in December 2010 for $495,000.
c. What is her basis for the replacement property in (a) and in (b)?
d. Calculate Jessica's realized and recognized gain or loss if she does not invest in replacement property.