Question

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5. Milaro's Pizza was late ro's Pizza was located in Burke, VA. On January 1, 2019, a greasefire from the Kitchen completely destroyed the restaurant, which as of that date was valued at S2000. Luckily, the restaurant had taken out an insurance policy related to this type of accident when they first purchased the restaurant on February 5, 2014 for $185.000, and the company had kept up on the insurance premiums. The accumulated depreciation as of the date of the fire was $50,000. The restaurant received a check from the insurance on July 15, 2019 for the full fair market value as of the date the restaurant as destroyed. The owner immediately paid the money to a construction company to rebuild the exact same restaurant (qualified replacement property) to begin operations by November 15, 2019 (total of 20 points possible: 10 points each) a. What is the total amount of the gain (or loss) Milaro's Pizza recognizes in 2019 b. Say that instead of rebuilding the restaurant, the owner instead wants to have a lawn and garden center constructed over the same time period that she would have had the new restaurant built because she was shaken by the experience with the grease fire (no fires from plants!). The lawn and garden center does not qualify as qualified replacement property. Based on this alternative scenario, what is the total amount of the gain (or loss) that must recognized in 2019 now?

Answer 1

Ansoer Given data 27S7000 pebruary 5 , aol9 the e Caught up uas vestausant on danuany They fst puehased the doly the purchase paice The accumlate d cepreciafion fige coas on $1851000 was as of the data of the So,000 )he totel amount of the dn Mlavos a affect of value that is afte book net depreciations 8S000-Soo00 3so00 Since Can See the fain value as We on fne the net book value the clam veceived than the net book vaue, So this s On date Moie than willbe more the clear Case Profit atount 1Sooo 135000 Porofft atount

ordes -to amount th Ps ompany must be ead for the qualified avail the insurance from nsurance replacement profet As tisclearty Statad that garden Center o not Valified as qaliedeplacent popexty So, if ampany pes oith tis attenalive then no Sembursed y the ?nsurar Compary acount of fire money for fha oss on 9Hence the net book Yalue Shall be teognize as (oss boots n the accouniry 3Sooo $ he (ass shall be the net book value