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What is the basis in the new sailboat

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Problem 1: Mr. S owned a sailboat used in his charter business. The sailboat had an adjusted basis to him of $12k. In Year 1, the sailboat was completely destroyed by fire. S received a $20k reimbursement from his insurance company. For Year 1, S chose to postpone the gain. In Year 2, S purchased a new sailboat for $17k. For Year 2, what is the amount of S's recognized gain, and what is his basis in the new sailboat?

A Recognized Gain = 3k; sailboat basis = 12k
B Recognized Gain = 8k; sailboat basis = 17k
C Recognized Gain = 0; sailboat basis = 9k
D Recognized Gain = 0; sailboat basis = 12k

Reference no: EM132812901

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