use. In July of 2016, the house was struck $120,000 for his personal belongings. His
use. In July of 2016, the house was struck $120,000 for his personal belongings. His
Chapter14: Choice Of Business Entity—operations And Distributions
Section: Chapter Questions
Problem 44P
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Transcribed Image Text:Omar, a single person, purchased a home in July of 2004 for $400,000. He has lived in the home as his primary residence since he
purchased the house. In July of 2016, the house was struck by lighting and destroyed. He received a property settlement of $800,000
for the house and $120,000 for his personal belongings. His basis in the belongings was $140,000. In December 2016, Omar bought a
new home for $750,000 and purchased new belongings for $80,000. Omar has come to you to find out the tax effect of these
transactions. Explain, in detail, the tax consequences of the lightning strike and the subsequent purchases.
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