One of Reddys Fancy Dog Food factories is destroyed by a tornado. The factory has an adjusted

Question:

One of Reddy’s Fancy Dog Food factories is destroyed by a tornado. The factory has an adjusted basis of $375,000. Reddy’s receives $540,000 from its insurance company to cover the loss. What is the minimum amount of gain that must be recognized in each of the following situations and the basis of any property purchased with the insurance proceeds?
a. Reddy’s decides that the lost production could be made up by its other factories and uses the proceeds to pay a cash to its shareholders.
b. Reddy’s purchases another factory for $590,000.
c. Reddy’s purchases another factory for $480,000.
d. Reddy’s purchases another factory for $350,000.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...