Multi Inc., a company with a December 31 year end, operates out of a single building that cost $815,000. At the beginning of 2019, the UCC for its Class 1 was $648,275. On June 30, 2019, the building was completely destroyed in a tornado. The building was insured for its fair market value of $1,000,000 and this amount was received in September, 2019. The building is replaced in 2020 with a 10 year old building at a cost of $1,075,000. Multi Inc. wishes to minimize taxes.
Describe the 2019 and 2020 tax consequences of these events, including the capital cost and UCC for the replacement building at the end of 2020. Ignore any gain or loss related to the land on which the building is located.

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The Answer of Multi Inc., a company with a December 31 year end, operates out of a single building that cost $815,000. At the beginning of 2019, the UCC for its Class 1 was $648,275. On June 30, 2019, the building was completely destroyed in a tornado. The building was insured for its fair market value of $1,000,000 and this amount was received in September, 2019. The building is replaced in 2020 with a 10 year old building at a cost of $1,075,000. Multi Inc. wishes to minimize taxes.
Describe the 2019 and 2020 tax consequences of these events, including the capital cost and UCC for the replacement building at the end of 2020. Ignore any gain or loss related to the land on which the building is located.

Multi Inc, a Company with a December 31 Year End, Operates