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Roberto a sole proprietor purchased a warehouse in 2016 for 500,000. His adjusted basis in the warehouse as of 12/31/2019 was $ 455,200. during 2020 there was a fire in the warehouse and Roberto spent $115,000 to repair the damage. The fire insurance company paid Roberto $ 100,000 on his damage claim. Assuming the 2020 depreciation expense on the warehouse is $ 40,000 what is the adjusted basis of the warehouse at 12/31/2020

Respuesta :

anthougo

Roberto's warehouse had an adjusted basis on December 31, 2020, is $430,200.

Data and Calculations:

Purchase cost of warehouse in 2016 = $500,000

Adjusted basis on December 31, 2019 = $455,200

Cost to repair damage =                            $115,000

Indemnity from insurance company =    ($100,000)

Depreciation expense for 2020              ($40,000)

Adjusted basis on Dec. 31, 2020          $430,200

Thus, Roberto's warehouse has an adjusted basis of $430,200 as of December 31, 2020.

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