Christ owns a factory building that he has used in his business for many years. On 1/28/20, the factory was totally destroyed in a fire. Christ received $ 5,000,000 from his insurance company for this total loss. At the time of this loss, Christ had an adjusted basis in this factory of $ 2,000,000 ($ 3,000,000 original cost less $ 1,000,000 in accumulated straight-line tax depreciation). Christ replaced the factory at a cost of $ 4,800,000 in November of 2020. Calculate Christ’s 2020 realized gain of loss from the above How much gain or loss will Christ recognize for tax purposes in 2020? How much additional federal tax will Christ incur in 2020 assuming his marginal ordinary income tax rate is 37% and his net capital gain rate is 20%? What is Christ’s tax basis in the replacement factory building?
Christ owns a factory building that he has used in his business for many years. On 1/28/20, the factory was totally destroyed in a fire. Christ received $ 5,000,000 from his insurance company for this total loss. At the time of this loss, Christ had an adjusted basis in this factory of $ 2,000,000 ($ 3,000,000 original cost less $ 1,000,000 in accumulated straight-line tax
- Calculate Christ’s 2020 realized gain of loss from the above
- How much gain or loss will Christ recognize for tax purposes in 2020?
- How much additional federal tax will Christ incur in 2020 assuming his marginal ordinary income tax rate is 37% and his net
capital gain rate is 20%? - What is Christ’s tax basis in the replacement factory building?
Federal Income tax: Federal income tax is a tax on income and is imposed by the United State federal government. The IRS collects the tax. Businesses (employers) must follow the IRS-determined tax schedule to submit timely taxes. Federal tax filing for employers does not occur yearly (unlike individual taxes) but throughout the year.
Claim Received from the Insurance company = $5,000,000
Adjusted basis of old factory building = $2,000,000
Realized gain by a loss by fire in 2020 = $3,000,000
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