Question

sally owned a clothing store which was damaged by a flood on November 25 2017. on January 7 2018 she received insurance proceeds of 280000. the adjusted basis of the clothing store was 140000. she purchased another clothing store on March 18 2018 for $310000. what is sally basis in the clothing store purchased?

Answer 1

Sally has (280000-140000) =140000 realized Gain.

Assuming she make the election no recognized gain the purchase price was 310000.

Adjusted Basis or Adjusted Tax Basis refers to the original cost or other basis of property, reduced by depreciation deductions and increased by capital expenditures.

Example: Brad buys a lot for $100,000. He then erects a retail facility for $600,000, then depreciates the improvements for tax purposes at the rate of $15,000 per year. After three years his adjusted tax basis is $655,000 [$100,000 + $600,000 - (3 x $15,000)].

Adjusted basis is one of two variables in the formula used to compute gains and losses when determining gross income for tax purposes. The Amount Realized – Adjusted Basis tells the amount of Realized Gain (if positive) or Realized Loss (if negative).