Issue Recognition Problems Ide

Issue Recognition Problems Identify the tax issue or issues suggested by the following situations, and state each issue in the form of a question.

Company T operated a drive-in movie theater from 1980 through 2007. The company ceased operations because so few people were attending the outdoor facility. This year, the entire facility (movie screen, projection building, snack bar, 15 picnic tables, and playground equipment) was destroyed by a tornado. Company T received a $360,000 insurance reimbursement. The aggregate adjusted basis in the destroyed properties was $200,000. Four months after the twister, Company T purchased a new four-screen movie theater complex located in an urban shopping mall.

 
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Issue Recognition Problems Ide

Issue Recognition Problems Identify the tax issue or issues suggested by the following situations, and state each issue in the form of a question.

In 2013, an office building owned by Firm F was completely destroyed by fire. F’s adjusted basis in the building was $485,000, and its insurance reimbursement was $550,000. On its 2013 tax return, F elected to defer the $65,000 gain realized on the in-voluntary conversion. In 2015, F invested $560,000 in another office building. In 2016, F settled a dispute with its insurance company concerning the 2013 claim. Pursuant to the settlement, it received a $25,000 additional reimbursement.

 
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