Ebon Company Had an Involuntary Conversion on December 23,2011

question 8

Multiple Choice

Ebon Company had an involuntary conversion on December 23,2011.The machinery had been acquired on April 1,2009,for $69,000 and its adjusted basis was $14,200.The machinery was completely destroyed by fire and Ebon received $10,000 of insurance proceeds for the machine and did not replace it.This was Ebon's only casualty or theft event for the year.As a result of this event,Ebon 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.