Question

Mitchell, a calendar year taxpayer, is the sole proprietor of a fast-food restaurant. His adjusted basis for the building and the related land is $450,000. On March 4, 2013, state authorities notify Mitchell that his property is going to be condemned so that the highway can be widened. On June 20, Mitchell’s property is officially condemned, and he receives an award of $625,000. Because Mitchell’s business has been successful in the past, he would like to reopen the restaurant in a new location. a. What is the earliest date Mitchell can acquire a new restaurant and qualify for § 1033 postponement? b. On June 30, Mitchell purchases land and a building for $610,000. Assuming thathe elects postponement of gain under § 1033, what is his recognized gain?c. What is Mitchell’s adjusted basis for the new land and building?d. If he does not elect § 1033, what are Mitchell’s recognized gain and adjustedbasis?e. Suppose he invests the $625,000 condemnation proceeds in the stock market onJune 30. What is Mitchell’s recognized gain?

Answer 1

Please consider the explanation below

Step-by-step explanation:

The earliest date Mitchell can purchase land and building is 4 March,2013-the date of threat of condemtion

According to section 1033 if a property similar to the property conveted , no gain shall be recognized.

b) If he elects section 1033 than there is no recognized gain.

c) His adjusted basis is $450000 cost of old land and building and plus any additional cost above $625000 what he has received.

d) he he invest in stock he does not qualify for 1033 so his recognized gain is $625000-450000=$175000.