Question

In April, vandals completely destroyed outdoor signage owned by Renfru Inc. Renfru's adjusted tax basis in the signage was $31,300. Renfru received a $50,000 reimbursement from its property insurance company, and on August 8, it paid $60,000 to replace the signage. Compute Renfru's recognized gain on loss on the involuntary conversion and its tax basis in the new signage.

Answer 1

Answer:

Renfru's basis in the new signage is $41.300  

Explanation:

To calculate the Renfru's basis in the new signage is necessary rest de total cost and the deferred gain of the exercise, for a total of $41.300  

(60.000 cost - $18.700 deferred gain).