Betty Owns a Horse Farm with 500 Acres of Land

Multiple Choice

Betty owns a horse farm with 500 acres of land (adjusted basis of $600,000) . Fifty acres of the land are condemned by the state for $400,000 in order to build a municipal stadium. Since the fair market value of Betty's farm is significantly decreased by the proximity to the future stadium, the state awards Betty $300,000 in severance damages. Betty does not use the $300,000 to restore the usefulness of the farm and all of the $700,000 ($400,000 +$300,000) proceeds are invested in the stock market. What is her recognized gain or loss associated with the receipt of the severance damages?

A) $0
B) $100,000
C) $300,000
D) $340,000
E) None of the above