The building used in Tim's business was condemned by the city of Lafayette.Tim received a condemnation award of $125,000.He paid $1,200 in lawyer's fees and $800 for an appraisal of the property.Tim's adjusted basis in the building was $60,000.Tim reinvests in similar property costing $110,000,and Tim makes the proper election regarding the property.What is the amount of Tim's realized (not recognized)gain on the condemnation?
A)$0
B)$50,000
C)$63,000
D)$65,000

Question

Quizplus · Accepted Answer

To calculate the realized gain, we need to subtract the adjusted basis from the total amount received from the condemnation award and the reimbursements of the lawyer's fees and appraisal costs. 
Total amount received: $125,000
Reimbursements: $1,200 + $800 = $2,000
Adjusted basis: $60,000
Realized gain: $125,000 - $2,000 - $60,000 = $63,000
Since Tim reinvests in similar property and makes the proper election, this gain is not recognized for tax purposes.

The Building Used in Tim's Business Was Condemned by the City