70. The city of Stillcreek decides to expand the runway at the local airport. To get the land for the expansion, it condemns the property it needs and pays the owners the current appraised value. Buster’s house is condemned, and he is paid $340,000 for his prop- erty. Buster, who is single, had purchased the property for $70,000 and had made
$30,000 in improvements to it. He plans to use the proceeds to purchase a new resi- dence but is unsure how much he should reinvest in the new home. In addition to the condemnation, 1,000 shares of stock that Buster owns in Cantmis Corporation become worthless during the year. His loss on the stock is $22,000, and he does not anticipate any large capital gains in the next few years. Buster has heard that there have been changes in the tax law concerning principal residences, and seeks your advice. Discuss Buster’s options concerning the condemnation of his property.
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