Final answer:
This scenario relates to the involuntary conversion of Allison's property and the subsequent reinvestment of insurance proceeds. The key points are the adjusted basis of the property, the amount of insurance reimbursement received, and the reinvestment in a new property and purchase of stock, which have specific tax implications that may allow for the deferral of gain recognition.
Step-by-step explanation:
On February 24, 2019, Allison's building, with an adjusted basis of $1,380,100 (and used in her trade or business), is destroyed by fire. On March 31, 2019, she receives an insurance reimbursement of $1,794,130 for the loss. Allison then reinvests $1,614,717 in a new building for her trade or business, utilizing the insurance proceeds.
Given that Allison is a calendar year taxpayer, this scenario typically pertains to a tax event. Specifically, it would involve calculating any potential gain or loss from the involuntary conversion of property due to destruction, and determining the treatment of the insurance proceeds for tax purposes. The fact that Allison reinvested most of the insurance proceeds into a new property for her business might allow her to defer recognizing any gain, provided that specific tax rules and requirements are met.
The balance of insurance proceeds spent on buying stock represents a financial decision outside the direct replacement of the business asset and may have different tax implications. Tax implications of such transactions could be complex and often require the guidance of a tax professional or an accountant to ensure proper reporting and compliance with the tax code.