Determine the tax consequences to Albert

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Problem - Albert owns 100 acres of land on which he grows spruce trees. His adjusted basis for the land is $100,000. He receives condemnation proceeds of $10,000 when the city's new beltway takes 5 acres along the eastern boundary of his property. He also receives a severance award of $6,000 associated with the possible harmful effects of exhaust fumes on his trees. Albert invests the $16,000 in a growth mutual fund. Determine the tax consequences to Albert of the:

a. Condemnation proceeds.

b. Severance award.

Reference no: EM132670781

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