Question

Sally owned a clothing store which was condemned on November 25, 2017. On January 7, 2018, she received a condemnation award of $280,000.00. The adjusted basis of the clothing store was $120,000.00. She purchased another clothing store on March 18, 2019 for $300,000.00

a) What is Sally’s recognized gain if Sally elects to be treated by § 1033?

b)    What is Sally’s basis in the clothing store?

3. What is the latest date that Sally can qualify for nonrecognition treatment?
4. What is the answer to (c) if the clothing store had been destroyed by fire instead of being   condemned?

Answer 1

i) $condemnation award of - adjusted basis of the clothing store was

=$280,000.00 - $120,000.00

= $160,000.

ii) $300,000.00 - $160,000

= $140,000

a). Sally has until December 31, 2019, to substitute with the fitted property because Sally has until three years later the end of the year in which the result(s) are cleared in the fact of a reproach.
b). Sally has until December 31, 2018, to substitute with the qualified property because she has till two years later the end of the year in which the result(s) are cleared in the fact of a disaster.

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