Harry Owns Equipment ($50,000 Basis and $38,000 FMV)and a Building

question 101

Multiple Choice

Harry owns equipment ($50,000 basis and $38,000 FMV) and a building ($140,000 basis and $156,000 FMV) ,which are used in his business.Harry uses straight-line depreciation for both assets,which were acquired several years ago.Both the equipment and the building are destroyed in a fire,and Harry collects insurance proceeds equal to the assets' FMV.The tax result to Harry for this transaction is

• A)the involuntary conversions are treated as ordinary gains and losses.
• B)the involuntary conversions are treated as Sec.1231 gains and losses.
• C)the loss on involuntary conversion is treated as a Sec.1231 loss while the gain is treated as an ordinary gain.
• D)the loss on involuntary conversion is treated as an ordinary loss while the gain is treated as a Sec.1231 gain.

---

Definitions:

Frontal Lobe

The part of the cerebrum located at the front of the brain, associated with reasoning, planning, parts of speech, movement, emotions, and problem-solving.

Cerebral Cortex

The cerebral cortex is the outer layer of neural tissue of the cerebrum of the brain, playing a key role in memory, attention, perception, cognition, awareness, thought, language, and consciousness.

Hypothalamus

A small region of the brain below the thalamus, crucial for maintaining homeostasis and regulating functions such as hunger, thirst, and temperature.

Hindbrain

The posterior part of the brain, including the cerebellum and brainstem, responsible for controlling various basic functions such as respiration and heart rate.