Jason, a calendar year taxpayer, is the sole proprietor of a hardware store. His adjusted basis for the building and the related land is $150,000. On March 4, 2012, state authorities notify Jason that his property is going to be condemned so that the highway can be widened. On June 1, Jason’s property is officially condemned, and he receives an award of $212,000. Because Jason’s business has been successful in the past, he would like to reopen the hardware store in a new location.
a. What is the earliest date Jason can acquire a new hardware store and qualify for § 1033 postponement?
b. On June 30, Jason purchases land and a building for $200,000. Assuming that he elects postponement of gain under § 1033, what is his recognized gain?
c. What is Jason’s adjusted basis for the new land and building?
d. If he does not elect § 1033, what are Jason’s recognized gain and adjusted basis?
e. Suppose he invests the $212,000 condemnation proceeds in the stock market on June 30. What is Jason’s recognized gain?