Sidney,a calendar year taxpayer,owns a building in Columbus,OH,in which he conducts his retail computer sales business.The building is destroyed by fire on December 12,2013,and two weeks later he receives insurance proceeds of $600,000.Due to family ties,Sidney decides to move to Columbia,SC.He reinvests all of the insurance proceeds in a building in Columbia where he opens a retail computer sales business on April 2,2014.By electing § 1033,Sidney has no recognized gain and a basis in the new building of $450,000 ($600,000 cost - $150,000 postponed gain).

Question

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By electing § 1033, Sidney can postpone the gain from the destruction of his building and reinvest the insurance proceeds in a new property without recognizing any gain. His basis in the new building will be reduced by the amount of the postponed gain, resulting in a basis of $450,000.

Sidney,a Calendar Year Taxpayer,owns a Building in Columbus,OH,in Which He