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    Casualty GAIN

    Client's commercial/rental building burns down. He ends up cleaning up the land and still owns it as the city is really restricting what they want there. He decides to buy elsewhere as he waits for the city to buy it. So I calculate the gain on the insurance proceeds to be $600,000 less the basis in the building only, $300,000. Now he buys a commercial building in another town for $250,000 with a mortgage of $200,000. He fixes up the building for another $25,000 and puts a laundromat(sp) in with equipment of $35,000. He is still well within the time period for replacement-December of 2007. Where is he at.

    Does he get to count the full price of the building $ 250,000
    The full price of the improvements 25,000
    The equipment 35,000
    Less the gain to ber postponed ( 300,000)
    --------------
    Gives you the tax basis in items-equipment $ 10,000

    Does that work, does the mortgage change anything???

    He will still have a gain or a lose on the land which has a basis of $40,000.

    Thanks.........

    #2
    OK Pub 547

    You have to buy based on the gross porceeds received. No mortgage does not count against you. I think in my example the gain is taxable except for the $10,000.

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