1. Will Mame recognize a gain on her individual tax return for a portion of the insurance proceeds given that the fair market value of the property lost in the fire exceeds her adjusted basis in the property?
Section 1033(a)(2)(a) states that property that is destroyed and involuntarily converted into money would recognize a gain equal to the amount of proceeds realized minus the taxpayer’s adjusted basis in the property. However, the taxpayer can make an election to defer either some or all of the gain if she “purchases other property similar or related in service or use to the property converted.”
a. Will Mame recognize a gain on the insurance proceeds resulting from a loss of the hotel and furniture given that she is building a new hotel
Section 1033(a)(2)(a) states that property that is destroyed and involuntarily converted into money would recognize a gain equal to the amount of proceeds realized minus the taxpayer’s adjusted basis in the property. However, the taxpayer can make an election to defer either some or all of the gain if she “purchases other property similar or related in service or use to the property converted.”
a. Will Mame recognize a gain on the insurance proceeds resulting from a loss of the hotel and furniture given that she is building a new hotel