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

Quizplus · Accepted Answer

The basis of the house after the repairs is $80,000. This is because the adjusted basis of the house before the flood was $90,000, and the insurance proceeds of $50,000 are not taxable. The cost of repairs of $40,000 is added to the adjusted basis to arrive at the new basis of $80,000.

Georgia's Home Was Damaged by Flood