Which of the following situations would not be permitted to defer the recognition of any recapture that might arise from the disposition of the asset?
A) A half-ton truck that belonged to a construction company was stolen in 20X0. Insurance proceeds were received which generated recapture. The truck was replaced in 20X1.
B) A building that was used for income earning purposes was destroyed in a fire. Insurance proceeds were received which generated recapture. A new building was built one and a half years later.
C) A customized half-ton truck that belonged to a construction company was sold in 20X0. The proceeds from the sale generated recapture. A new customized truck was purchased fourteen months later in order to carry out the duties of a large contract
Awarded to the company.
D) A building that was used for income earning purposes was sold in December 20X0. The proceeds from the sale generated recapture. A new building was purchased in April 20X1. The company's fiscal year-end is December 31st.

Question

Quizplus · Accepted Answer

Recapture deferral is typically allowed when an asset is involuntarily disposed of (e.g., theft or destruction) and replaced within a certain time frame. In option C, the truck was voluntarily sold, which does not qualify for deferral of recapture.

Which of the Following Situations Would Not Be Permitted to Defer