Ray Randall purchased a residence on February 14, 2010 for $190,000. On September 15, 2012, a tornado completely destroyed his home. fte home was insured for its replacement value and homes in Ray's area had appreciated greatly. He received proceeds of $410,000.
(a.) How much does Ray exclude and recognize?
(b.) If Ray instead had received proceeds of $555,000. How much gain would be excluded and recognized? How much of a replacement residence would have to be purchased in order to exclude or defer all gain realized?

Question

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The Answer of Ray Randall purchased a residence on February 14, 2010 for $190,000. On September 15, 2012, a tornado completely destroyed his home. fte home was insured for its replacement value and homes in Ray's area had appreciated greatly. He received proceeds of $410,000.
(a.) How much does Ray exclude and recognize?
(b.) If Ray instead had received proceeds of $555,000. How much gain would be excluded and recognized? How much of a replacement residence would have to be purchased in order to exclude or defer all gain realized?

Ray Randall Purchased a Residence on February 14, 2010 for $190,000