Carrie owns a business building with an adjusted basis of $95,000 and an appraised fair market value of $98,000. The city of Millerville condemns the property for a new highway. The condemnation award is $98,000. Carrie invests $90,000 of the proceeds into a new building on the other side of the city. What is the gain or loss that Carrie must recognize due to the transactions?
A)No gain or loss
B)$3,000 gain
C)$3,000 loss
D)$8,000 gain
E)$5,000 loss

Question

Quizplus · Accepted Answer

Carrie must recognize a gain of $3,000, which is the difference between the condemnation award ($98,000) and the adjusted basis of the property ($95,000). The reinvestment of $90,000 does not affect the recognition of the gain.

Carrie Owns a Business Building with an Adjusted Basis of $95,000