Susan's farm, which was used in her business, was destroyed in a fire. Susan's adjusted basis...

Susan's farm, which was used in her business, was destroyed in a fire. Susan's adjusted basis in the farm was $525,000, and the FMV was $1,000,000. Susan filed an insurance claim and was reimbursed $1,000,000. In that same year, Susan rebuilt the farm using $950,000 of the insurance proceeds. Assuming the proper election is made to defer gain, calculate Susan's basis in the rebuilt farm.

Expert Solution

Adjusted basis the value of Farm was : $525000

FMV was: $ 10,00,000

Net increase in Value: $475000

Insurance claim was filed for $ 10,00,000

Claim Reimbursed For $ 10,00,000

Cost of rebuit of new far,: $ 950,000

Surplus amount of Insurance claim: $50,000

Hence, Again capitalised the farm on adjusted basis by decreasing $50,000 from Original adjusted value of $ 525,000, which was reecived from Insurance company.

ekkarill92 answered 2 years ago

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