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?

Question

Quizplus · Accepted Answer

The realized gain is the difference between the condemnation award and the adjusted basis: $125,000 - $60,000 = $65,000. However, since Tim reinvested in similar property costing $110,000 and made the proper election, the gain is not recognized.

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