Red Company Had an Involuntary Conversion on December 23, 2012

question 126

Multiple Choice

Red Company had an involuntary conversion on December 23, 2012.The machinery had been acquired on April 1, 2010, 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:

Back Pain

Back pain is discomfort or pain felt in the back, which can be acute or chronic, and can result from various factors such as injury, activity, or some medical conditions.

Blepharoptosis

A medical condition characterized by the drooping or falling of the upper eyelid.

Drooping Eyelid

A condition known medically as ptosis, characterized by the upper eyelid falling to a lower position than normal, potentially obstructing vision.

Sagging

The condition of drooping or sinking under weight or pressure, often referring to structures or physical appearance.