Kareem's office building is destroyed by fire on April 11, 2016. Settlement is reached with the insurance company on November 1, 2016 when he receives a check for $900,000. The property had recently been appraised for $920,000. Kareem's adjusted basis in the building was $800,000.
a. What is Kareem's realized gain or loss?
b. Assume Kareem wishes to defer the maximum amount of gain. Indicate:
(1) the minimum amount that must be spent on a new property.
(2) any restrictions on the new property in order for it to qualify,
(3) the deadline for placing the new property in service. c. Assume that instead of a fire, the state forces Kareem to sell the property. Indicate how your responses to part b would differ.

Question

Kareem's office building is destroyed by fire on April 11, 2016. Settlement is reached with the insurance company on November 1, 2016 when he receives a check for $900,000. The property had recently been appraised for $920,000. Kareem's adjusted basis in the building was $800,000.
a. What is Kareem's realized gain or loss?
b. Assume Kareem wishes to defer the maximum amount of gain. Indicate:
 (1) the minimum amount that must be spent on a new property.
(2) any restrictions on the new property in order for it to qualify,
(3) the deadline for placing the new property in service. c. Assume that instead of a fire, the state forces Kareem to sell the property. Indicate how your responses to part b would differ.

Quizplus · Accepted Answer

The Answer of Kareem's office building is destroyed by fire on April 11, 2016. Settlement is reached with the insurance company on November 1, 2016 when he receives a check for $900,000. The property had recently been appraised for $920,000. Kareem's adjusted basis in the building was $800,000.
a. What is Kareem's realized gain or loss?
b. Assume Kareem wishes to defer the maximum amount of gain. Indicate:
 (1) the minimum amount that must be spent on a new property.
(2) any restrictions on the new property in order for it to qualify,
(3) the deadline for placing the new property in service. c. Assume that instead of a fire, the state forces Kareem to sell the property. Indicate how your responses to part b would differ.

Kareem's Office Building Is Destroyed by Fire on April 11