Georgia's home was damaged by flood. Its fair market value before and after the flood are $125,000 and $75,000, respectively. Its adjusted basis was $90,000. Georgia received $50,000 from her insurance company and she was able to have the house repaired for $40,000. What is the amount of Georgia's basis in the house after the repairs?

Question

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Georgia's basis in the house before the flood was $90,000. After the flood, her basis was adjusted to the fair market value of $75,000. When she received $50,000 from her insurance company and had the house repaired for $40,000, her adjusted basis became $90,000 + $40,000 - $50,000 = $80,000. Therefore, the amount of Georgia's basis in the house after the repairs is $80,000.

Georgia's Home Was Damaged by Flood