In June, a fire completely destroyed office furniture owned by W&S Inc. W&S's adjusted tax basis in the furniture was $17,040. W&S received a $15,000 reimbursement from its property insurance company, and on August 8, it paid $16,000 to replace the furniture. Compute W&S's recognized gain on loss on the involuntary conversion and its tax basis in the new furniture.
A. No recognized gain or loss; $13,960 basis in the furniture
B. $2,040 recognized loss; $16,000 basis in the furniture
C. No recognized gain or loss; $18,040 basis in the furniture
D. None of the above
Answer: B
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