A ﬁre destroyed Carl Cramer's business automobile. Carl originally paid $24,000 for the automobile and up to the time of the ﬁre had been allowed $15,000 in depreciation. Within three months the insurance company replaced the old automobile with a new one which was worth $21,000. What is the basis of the new automobile for purposes of computing depreciation?
A) $3,000
B) $9,000
C) $15,000
D) $21,000
E) $24,000

Question

Quizplus · Accepted Answer

the basis is $9,000 ($9,000 basis of the old automobile). Since Carl received the new automobile from the insurance company rather than receiving a cash award, the basis is the same as the basis of the old property.

A ﬁRe Destroyed Carl Cramer's Business Automobile