Sally owned a clothing store which was condemned on November 25, 2017. On Januar

Question

Sally owned a clothing store which was condemned on November 25, 2017. On January 7, 2018, she received a condemnation award of $280,000.00. The adjusted basis of the clothing store was $120,000.00. She purchased another clothing store on March 18,2018 for $300,000.00 (a)What is Sally's recognized gain or loss? (b) What is Sally's basis in the clothing store? (c) What is the latest date that Sally can qualify for nonrecognition treatment? (d)What is the answer to (c) if the clothing store had been destroyed by fire instead of being condemned?

Explanation / Answer

Sally has a realized gain of $160000 ($280,000 less $120,000). He may exclude $160000 For recognizing gain. As she purchased home for $300,000 or more, he could defer the remaining $160000 of realized gain. to be used when applying the gain deferral provision under the involuntary conversion rules of Code Sec. 1033.

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