Identify Tax Issues

timer Asked: Nov 22nd, 2016

Question description

1) Mrs. Lynn Smot owned an indoor soccer arena as a sole proprietorship. On April 13, a fire completely destroyed the arena. Mrs. Smot’s adjusted basis in the arena was $833,400. On May 12, she received a check for $1.1 million from her insurance company in a complete settlement of her damage claim. Mrs. Smot is planning to use the entire insurance settlement to purchase 100 percent of the outstanding stock of SoccerMagic, Inc., a corporation that owns an indoor soccer arena. Can she defer the recognition of gain due to the destruction of her soccer arena by purchasing the stock of SoccerMagic?

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