On September 3, 2015, Federal Corporation\'s warehouse is totally destroyed by f

Question

On September 3, 2015, Federal Corporation's warehouse is totally destroyed by fire. $800,000 of insurance proceeds are received, and the realized gain is $300,000. Whenever possible, Federal elects to defer gains. For each of the following independent situations, what is the amount of gain recognized? Explain why the gain is not deferred, if applicable.

a) On October 23, 2015, Federal purchases a warehouse for $770,000.

b) On February 4, 2016, Federal purchases 100% of the Park Corporation, which owns a warehouse. Federal pays $895,000 for the stock.

c) On November 20, 2017, Federal purchases an apartment complex for $900,000.

d) On March 26, 2018, Federal purchases a warehouse for $888,000

Explanation / Answer

a) Capital gain has been deferred upto 770,000 as Sale proceeds has been invested in like asset within 180 days. (1031)

b) Capital gain has not been deferred as Stocks are expressely excluded from code 1031 exchange to qualify for deferrement.

c) Apartment complex is not lik asset so it does not qualify for deferrement.

d) Although the asset is like wise and whole sale has been utilised for purchase, it is not done within 180 days so it does not qualify for deferrement.

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