taxes questions




Problem 1  (6  Points)




Kristi had a business building destroyed in an earthquake. The old building was purchased for $250,000 and $80,000 of depreciation deductions had been taken. Her insurance proceeds were $550,000. Although the replacement property was much larger and nicer than her old building, Kristi’s new property qualified as replacement property. She acquired the new property 13 months after the earthquake for $620,000. What is the amount of Kristi’s realized gain and recognized gain and the basis in her new property? 












Problem 2  (6  Points)






Hauswirth Corporation sold (or exchanged) some manufacturing equipment in year 0.  Hauswirth bought the machinery several years ago for $65,000 and it has claimed $23,000 of depreciation expense against the equipment.




    1. Assuming that Hauswirth receives $50,000 in cash for the equipment, compute the amount and character of Hauswirth’s recognized gain or loss on the sale.


    2. Assuming that Hauswirth receives like-kind equipment with a fair market value of $50,000 in exchange for its equipment, compute Hauswirth’s gain realized, gain recognized, deferred gain, and basis in the new equipment.


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