Question 1- Ben's property, which has an adjusted basis of $45,000, is condemned by the state government. The authorities replace his property with other qualified property which cost them $120,000. What is Ben's recognized gain?
a- $35,000
b- $85,000
c- $0
d- $120,000
Question 2- Under the cash method of tax accounting, tax deductions are generally taken when:
a- Payment is made
b- The liability arises
c- There is net income to absorb the expense
d- None of the above