Red Company Had an Involuntary Conversion on December 23, 2018

question 162

Multiple Choice

Red Company had an involuntary conversion on December 23, 2018. The machinery had been acquired on April 1, 2016, 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:

Functionalist

Pertaining to the theory that all aspects of a society serve a function and are necessary for the survival of that society.

Heteronormativity

The belief system or social bias that presumes heterosexual relationships and norms as the default or only valid option.

Transsexuals

Transsexuals are individuals who have a gender identity that is different from the sex they were assigned at birth and who often seek to live as, or transition to, the gender with which they identify, sometimes involving medical intervention.

Physical Violence

The use of physical force with the intention of causing harm, injury, or physical suffering to an individual or group.