Red Company Had an Involuntary Conversion on December 23,2013

question 67

Multiple Choice

Red Company had an involuntary conversion on December 23,2013.The machinery had been acquired on April 1,2011,for $49,000 and its adjusted basis was $14,200.The machinery was completely destroyed by fire and Red received $10,000 of insurance proceeds for the machine and did not replace it.This was Red's only casualty or theft event for the year.As a result of this event,Red initially has:

• A)$10,000 § 1231 loss.
• B)$10,000 § 1245 recapture gain.
• C)$4,200 casualty loss.
• D)$4,200 § 1231 loss.
• E)None of the above.

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Definitions:

Selective Perception

The process by which individuals perceive what they want to in media messages while ignoring opposing viewpoints.

Stimulus Discrimination

The learned ability to distinguish between similar stimuli and respond only to the actual stimulus associated with a reward or punishment.

Selective Retention

The psychological process whereby people more easily remember information that is consistent with their beliefs, values, and previous experiences, often leading to biased recollection.

Selective Exposure

The tendency of individuals to preferentially seek out and attend to information that conforms to their existing beliefs and values.