Red Company Had an Involuntary Conversion on December 23, 2017

question 14

Multiple Choice

Red Company had an involuntary conversion on December 23, 2017. The machinery had been acquired on April 1, 2015, 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:

Geologic Timescale

A method of dating based on the chronological correlation of Earth's geological layers to time, utilized by geologists for depicting the sequence and association of historical events on Earth.

Seafloor Spreading

The process by which new oceanic crust is formed at mid-ocean ridges and slowly moves away from them.

Isotopic Ages

The determination of the age of rocks, minerals, or samples by measuring the relative abundance of specific isotopes.

Correlations

In geology, the establishment of equivalency between geological features or layers at different locations based on their characteristics and age.