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A taxpayer’s delivery van with an adjusted basis of $7,000 was stolen. Luckily, the taxpayer had...

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Operations Management

  1. A taxpayer’s delivery van with an adjusted basis of $7,000 wasstolen. Luckily, the taxpayer had comprehensive insurance on thevan so the taxpayer received $10,000 to cover the loss (i.e., itwas valued at $10,000 at the time of theft). The taxpayer isconsidering buying a new van for $15,000. What gain does thetaxpayer recognize and what would the replacement van’s basisbe?

    Gain:

    Basis in replacement van:

2. A taxpayer’s delivery van with an adjusted basis of $7,000was stolen. Luckily, the taxpayer had comprehensive insurance onthe van so the taxpayer received $10,000 to cover the loss (i.e.,it was valued at $10,000 at the time of theft). The taxpayer isconsidering buying a used van for $9,000. What gain does thetaxpayer recognize and what would the replacement van’s basisbe?

Gain:

Basis in replacement van:

Answer & Explanation Solved by verified expert
3.7 Ratings (720 Votes)
The property mentioned here is of a delivery van which has been stolen It is being assumed that the vehicle was used for business purposes and not for personal purpose Usually Theft loss is computed as reducing the insurance proceeds from the lower of the two a Adjusted basis b Decrease in the Fair market value as a result of the    See Answer
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