Grantly Seafood is a calendar year taxpayer. In 2019, a hurricane destroyed three of Grantly's fishing boats with a $784,500 aggregate adjusted tax basis. On October 12, 2019, Grantly received a $1 million reimbursement from its insurance company. On May 19, 2020, Grantly purchased a new fishing boat for $750,000. Compute Grantly's recognized gain or loss on the involuntary conversion and its tax basis in the new boat.
A. $215,500 recognized gain; $750,000 basis in the boat
B. $250,000 recognized gain; $784,500 basis in the boat
C. $250,000 recognized gain; $750,000 basis in the boat
D. None of the above
Answer: A
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