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construction, has the following property transactions:
a. In April, a tornado damages a crane and a dump truck at one of its construction
sites. The crane was acquired in 2009 for $120,000 and has an adjusted
basis of $39,650. The dump truck was acquired in 2007 for $70,000 and has
an adjusted basis of $33,880. The insurance company reimburses Harlow
$35,000 for the crane and $42,000 for the dump truck. The company decides
not to replace the dump truck and uses the insurance proceeds to purchase a
new crane for $110,000.
b. The company trades a road grader with a fair market value of $72,000 for a
bulldozer worth $60,000. Harlow receives $12,000 in the exchange. The road
grader originally cost $90,000 and has an adjusted basis of $50,000. The bulldozer
cost $85,000, and its adjusted basis is $37,000.
c. A fire destroys the company’s supply warehouse. The warehouse originally cost
$300,000 and has an adjusted basis of $200,000. Its fair market value before
the fire was $250,000. The insurance company pays Harlow $230,000, which
it uses to acquire a warehouse costing $280,000.
d. The city of Peaceable condemns land that Harlow had acquired in 1978 for
$22,000 and held as an investment. The city pays Harlow the $195,000 fair
market value of the land. Harlow uses the proceeds to acquire a commercial
office park for $350,000.
e. Harlow sells an automobile used by its president for business purposes for
$10,000 to a local car dealership. The car originally cost $32,000, and its
adjusted basis is $15,000. The company had an agreement to replace the automobile
with a customized four-wheel-drive vehicle from a company that specializes
in custom cars. However, the day the company sells the automobile, it
is informed that the custom car company will not be able to deliver the vehicle
for at least 10 weeks. Harlow terminates its contract with the custom car company
and buys a new automobile from the local car dealership for $55,000.
Determine the realized and recognized gain or loss on each of Harlow’s property
transactions and the basis of any property acquired in each transaction.
