Bonilla Company's oﬃce building was destroyed by a tornado. fte insurance company paid Bonilla $600,000 for the destruction of the oﬃce building within 30 days after the tornado. At the time of the tornado, Bonilla had an adjusted basis of $240,000 in the oﬃce building. Within six months after the tornado, Bonilla bought a new oﬃce building for $500,000 by paying $320,000 in cash and signing a mortgage note for $180,000. What is the minimum amount of gain that Bonilla must recognize on the involuntary conversion of its oﬃce building?

Question

Quizplus · Accepted Answer

the gain recognized is the lesser of the $360,000 gain realized ($600,000 - $240,000) or the $100,000 excess of the amount realized ($600,000) minus the cost of the qualiﬁed replacement property ($500,000). the cost of the qualiﬁed replacement property includes the $320,000 cash paid and the $180,000 mortgage note

Bonilla Company's Oﬃce Building Was Destroyed by a Tornado