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1)ABC Corporation owned a business warehouse that was destroyed by fire on October 1, 2020

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1)ABC Corporation owned a business warehouse that was destroyed by fire on October 1, 2020. On December 1, 2020 the corporation received an insurance payment of $900,000 for the loss. The corporation’s basis in the warehouse just prior to the loss was $500,000. The corporation would like to use the involuntary conversion rules to defer as much gain as possible. Assume the corporation built a new warehouse on the old site within the required timeframe and incurred construction costs of $950,000.How much gain would be taxable?What would be the corporation’s basis in the new building?2)Assume the same facts as in (1) above except that the construction costs of the new warehouse totaled $875,000. Answer the same questions again.

How much gain would be taxable?

What would be the corporation’s basis in the new building?