Joyce's office building was destroyed in a fire (adjusted basis of $350,000;fair market value of $400,000).Of the insurance proceeds of $360,000 she receives,Joyce uses $310,000 to purchase additional inventory and invests the remaining $50,000 in short-term certificates of deposit.She received only $360,000 because of a co-insurance clause in her insurance policy.What is Joyce's recognized gain or loss?
A)$0
B)$10,000 loss
C)$10,000 gain
D)$40,000 gain
E)None of these

Question

Quizplus · Accepted Answer

The receipt of insurance proceeds in excess of Joyce's adjusted basis for the office building creates a casualty gain to Joyce of $10,000 ($360,000 insurance proceeds - $350,000 adjusted basis).

Joyce's Office Building Was Destroyed in a Fire (Adjusted Basis