Apply Involuntary Conversion Rules Practice Test

Grantham Corp's factory was condemned by the state. Grantham received a condemnation award of $500,000. The factory's adjusted basis was $320,000. Grantham reinvested $480,000 in a replacement factory within the required period and elects Section 1033. How much gain must Grantham recognize?

Tessa's personal residence was destroyed by a tornado. She received insurance proceeds of $450,000. Her adjusted basis in the home was $200,000. She purchases a new home for $420,000 within the two-year replacement period and elects Section 1033 without applying Section 121. How much gain must she recognize?