Vandals destroyed a business asset owned by L&L Company. L&L's adjusted tax basis in the asset was $60,800, and the reimbursement from its property insurance company was $90,000. L&L must pay at least $60,800 for a replacement asset in order to defer gain recognition on the involuntary conversion.

Question

Quizplus · Accepted Answer

L&L must spend at least the amount of the insurance reimbursement ($90,000) on a replacement asset to defer gain recognition, not just the adjusted tax basis of the destroyed asset ($60,800).

Vandals Destroyed a Business Asset Owned by L&L Company