Walter experienced two significant losses in 20x1. First, his home was destroyed in a fire and he received $600,000 insurance proceeds. His adjusted basis in the home was $800,000 at the date he received the proceeds.

Second, his restaurant was completely destroyed by an earthquake. Unfortunately, he didnt have any insurance. His adjusted basis in and the fair market value of the restaurant was $400,000 on the date of the earthquake.

Walter has owned both properties for many years and the two losses represent the only property transactions that Walter was involved in for the taxable year.

ssume that Jane received $1 MM insurance proceeds when her chemical factory that she owned and operated was destroyed in a flood. Assume Jane's adjusted basis in the factory was $400,000 on the date of the flood.

Jane decided to reinvest all of the insurance proceeds in a hotel.

She also elected to utilize IRC 1033.

Which of the following statements is correct regarding the reinvestment and/or the 1033 election?

Select one:

a.

The gain is deferred under IRC 1033.

b.

The gain is deferred so long as the chemical factory and hotel are considered like kind property.

c.

The gain is taxable.

d.

The gain is clearly characterized as ordinary.

e.

None of the above.