On May 13, 2018, a flood destroyed the building in which SDF Inc. manufactured its product. SDF's adjusted tax basis in the building was $984,000. On November 29, 2018, SDF received a $1.2 million reimbursement from its casualty insurance company.
In each of the following cases, compute SDF's recognized gain on this involuntary conversion and its initial basis in the replacement property.
a. On June 2, 2019, SDF completed construction of a replacement building for $1.3 million.
b. On February 18, 2021, SDF paid $1.3 million to purchase a replacement building.
c. On August 30, 2020, SDF paid $1.1 million to purchase a replacement building.

Question

On May 13, 2018, a flood destroyed the building in which SDF Inc. manufactured its product. SDF's adjusted tax basis in the building was $984,000. On November 29, 2018, SDF received a $1.2 million reimbursement from its casualty insurance company. 
In each of the following cases, compute SDF's recognized gain on this involuntary conversion and its initial basis in the replacement property.
a. On June 2, 2019, SDF completed construction of a replacement building for $1.3 million.
b. On February 18, 2021, SDF paid $1.3 million to purchase a replacement building. 
c. On August 30, 2020, SDF paid $1.1 million to purchase a replacement building.

Quizplus · Accepted Answer

The Answer of On May 13, 2018, a flood destroyed the building in which SDF Inc. manufactured its product. SDF's adjusted tax basis in the building was $984,000. On November 29, 2018, SDF received a $1.2 million reimbursement from its casualty insurance company. 
In each of the following cases, compute SDF's recognized gain on this involuntary conversion and its initial basis in the replacement property.
a. On June 2, 2019, SDF completed construction of a replacement building for $1.3 million.
b. On February 18, 2021, SDF paid $1.3 million to purchase a replacement building. 
c. On August 30, 2020, SDF paid $1.1 million to purchase a replacement building.

On May 13, 2018, a Flood Destroyed the Building in Which