A factory building owned by Amber,Inc.is destroyed by a hurricane.The adjusted basis of the building was $400,000 and the appraised value was $425,000.Amber receives insurance proceeds of $390,000.A factory building is constructed during the nine-month period after the hurricane at a cost of $450,000.What is the recognized gain or loss and what is the basis of the new factory building?
A)$0 and $450,000.
B)$0 and $460,000.
C)($10,000)and $440,000.
D)($10,000)and $450,000.
E)None of these.

Question

Quizplus · Accepted Answer

Amount realized $390,000
Adjusted basis (400,000)
Realized loss ($ 10,000)
Recognized loss ($ 10,000)
Section 1033 does not modify the normal rules for loss recognition.The basis of the replacement factory building is its cost of $450,000.

A Factory Building Owned by Amber,Inc