Final answer:
The recognized gain for Inka is $0 because of the like-kind exchange, and her basis in the new residence is $70,000, which is the purchase cost of the new residence minus the unrecognized loss from her original residence. Therefore, the correct option is c. $0; $70,000.
Step-by-step explanation:
The student's question pertains to the calculation of recognized gain or loss and the basis in new property after a condemnation award. Inka's original residence had an adjusted basis of $100,000 and a condemnation award of $80,000 was received. She then purchased a new residence for $90,000. In this case, there is no recognized gain because the proceeds were used to purchase a new residence which is considered a like-kind exchange under tax law, provided certain conditions are met.
The basis in the new residence is the cost of the new residence minus the unrecognized loss. Therefore, the basis of the new residence would be the cost of the new residence ($90,000) minus the difference between the original residence's basis and the condemnation award ($100,000 - $80,000 = $20,000). This gives Inka a basis of $70,000 in her new residence. Hence, the correct answer is option "C. $0; $70,000."