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.

---

Definitions:

Test Hypotheses

The process of making an assumption about a population parameter and then using sample data to test whether the assumption holds true.

Margin of Error

A measurement of the maximum expected difference between the true population parameter and a sample estimate of that parameter.

Confidence

In statistics, the degree of certainty or probability that a parameter lies within a specified range of values.

Randomly Sample

A method of selecting a subset of individuals from a population in such a way that each individual has an equal chance of being chosen.