On April 27, 2017, an office building owned by the Ava James Corporation, an offshore drilling company

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On April 27, 2017, an office building owned by the Ava James 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 Ava James 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.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Federal Taxation 2018 Comprehensive

ISBN: 9780134532387

31st Edition

Authors: Thomas R. Pope, Timothy J. Rupert, Kenneth E. Anderson

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