What is adjusted tax basis in his new property

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A fire destroyed a machine that Newman owned and used in his small business. Newman had originally paid $50,000 for the machine. At the time of the fire the machine was fully depreciated. Newman received $55,000 from the insurance company to replace the insured property. Newman acquired the qualifying replacement property 13 months after the fire for $45,000.

What is the amount of Newman's realized and recognized gain on the involuntary conversion?

What is the character of the recognized gain (if any)?

What is Newman’s adjusted tax basis in his new property?

Reference no: EM131545204

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