On April 27, 2014, an office building owned by Newark Corporation, an offshore drilling company that is a calendar-year taxpayer, is destroyed by a hurricane. The basis of the office building is $600,000, and the corporation receives $840,000 from the insurance company.
a. To defer the entire gain due to the involuntary conversion, what amount must the corporation pay for replacement property?
b. To defer the gain due to the involuntary conversion, by what date must the corporation replace the converted property?
c. If Newark replaces the office building by purchasing a 900,000 gallon storage tank for $810,000, may it defer any of the gain due to the involuntary conversion?
d. Will answers to Parts b and c change if the office building had been condemned by the state? Explain.