McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 20

Baker Corporation owned a building located in Kansas.Baker used the building for its business operations.Last year a tornado hit the property and completely destroyed it.This year, Baker received an insurance settlement.Baker had originally purchased the building for $350,000 and had claimed a total of $100,000 of depreciation deductions against the property.What is Baker's realized and recognized gain or (loss) on this transaction and what is its basis in the new building in the following alternative scenarios?
a.Baker received $450,000 in insurance proceeds and spent $450,000 rebuilding the building during the current year.b.Baker received $450,000 in insurance proceeds and spent $500,000 rebuilding the building during the current year.c.Baker received $450,000 in insurance proceeds and spent $400,000 rebuilding the building during the current year.d.Baker received $450,000 in insurance proceeds and spent $450,000 rebuilding the building during the next three years.