Question

Ron's building, which was used in his business, was destroyed in a fire. Ron's adjusted basis in the building was 210,000, and its FMV was330,000. Ron filed an insurance claim and was reimbursed 300,000. In that same year, Ron invested240,000 of the insurance proceeds in another business building. What was the amount of Ron's gain or loss on the insurance reimbursement?

1) $90,000 gain
2) $60,000 gain
3) $60,000 loss
4) $90,000 loss

Answer 1

Ron's gain on the insurance reimbursement is $90,000.

Step-by-step explanation:

To determine the amount of Ron's gain or loss on the insurance reimbursement, we need to calculate the difference between his adjusted basis and the insurance claim amount. Ron's adjusted basis in the building was $210,000 and he was reimbursed $300,000. Therefore, his gain on the insurance reimbursement is $300,000 - $210,000 = $90,000.