Susan Short's oﬃce building is destroyed in a ﬁre. fte adjusted basis in the building is $200,000 and its fair market value is $350,000. fte insurance company reimburses Susan $330,000 for its loss, and she immediately purchases a new oﬃce building for $310,000. What is Susan's recognized gain and adjusted basis in the new oﬃce building?
A) $20,000 and $200,000, respectively.
B) $0 and $310,000, respectively.
C) $0 and $330,000, respectively.
D) $20,000 and $310,000, respectively.
E) None of the above.

Question

Quizplus · Accepted Answer

the realized gain is $130,000 ($330,000 less $200,000) and the recognized gain is $20,000 ($330,000 less
$310,000 cost of the new building). the basis of the new building is $200,000 ($310,000 cost of the new building less the deferred gain of $110,000).

Susan Short's Oﬃce Building Is Destroyed in a ﬁRe