Orange Company had machinery destroyed by a fire on December 23,2013.The machinery had been acquired on April 1,2011,for $49,000 and its adjusted basis was $14,200.The machinery was completely destroyed and Orange received $30,000 of insurance proceeds for the machine 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:

Question

Quizplus · Accepted Answer

The insurance proceeds of $30,000 exceed the adjusted basis of $14,200, resulting in a gain. The gain is subject to § 1245 recapture up to the amount of depreciation taken, which is $15,800 ($30,000 - $14,200).

Orange Company Had Machinery Destroyed by a Fire on December