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

question 60

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.The two assets were acquired five 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.

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Definitions:

Functionalism

A theory in psychology that emphasizes the importance of how mental and behavioral processes function to enable individuals and species to adapt to their environments.

Human Mind

The totality of conscious and unconscious mental processes and activities in a human being.

Behaviorists

Behaviorists focus on the study of observable and measurable behaviors, emphasizing the role of environmental factors in shaping behavior.

Environment Influence

The impact that surroundings, including physical, social, and cultural environments, have on living organisms and their development.