A barn, destroyed by ﬁre, had a basis of $40,000. fte owner received $50,000 in insurance proceeds. fte barn was replaced by another barn costing $45,000. fte basis of the new barn is:
A) $40,000
B) $45,000
C) $50,000
D) $55,000
E) $60,000

Question

Quizplus · Accepted Answer

the realized gain is $10,000 ($50,000 - $40,000) and the recognized gain is $5,000 ($50,000 - $45,000 cost of the new property). the basis of the new asset is $40,000 ($45,000 cost of new - the gain not recognized of
$5,000).

A Barn, Destroyed by ﬁRe, Had a Basis of $40,000