Lorreta has a manufacturing business. In the current year, her storage building is completely destroyed by fire and she receives $315,000 from her insurance company. She purchased the building for $300,000 20 years ago and has claimed depreciation of $85,000 using the straight-line method. In the following year, she purchases a new storage building at a cost of $295,000.
a.Calculate Lorreta's realized gain or loss.
b.Assuming Lorreta makes an election under the involuntary conversion provision, calculate Lorreta's recognized gain or loss?
c.Assuming Lorreta makes an election under the involuntary conversion provision, what is Lorreta's basis in the new building?

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The Answer of Lorreta has a manufacturing business. In the current year, her storage building is completely destroyed by fire and she receives $315,000 from her insurance company. She purchased the building for $300,000 20 years ago and has claimed depreciation of $85,000 using the straight-line method. In the following year, she purchases a new storage building at a cost of $295,000.
a.Calculate Lorreta's realized gain or loss.
b.Assuming Lorreta makes an election under the involuntary conversion provision, calculate Lorreta's recognized gain or loss?
c.Assuming Lorreta makes an election under the involuntary conversion provision, what is Lorreta's basis in the new building?

Lorreta Has a Manufacturing Business