Orange Company had machinery completely destroyed by a fire on December 23, 2019. The machinery had been acquired on April 1, 2017, for $49,000 and its adjusted basis was $14,200. Orange received $30,000 of insurance proceeds for the machinery and did not replace it. This was Orange’s only casualty or theft event for the year. As a result of this event, Orange has:
A. $4,200 ordinary loss.
B. $15,800 § 1245 recapture gain.
C. $14,200 § 1245 recapture gain.
D. $30,000 § 1231 gain.
E. None of these.
Answer: B
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