Thieves stole computer equipment owned by Eaton Company and used for three years in its consulting business.Eaton's adjusted basis in equipment was $23,200,and its replacement value was $50,000.Eaton's insurance company paid only $15,000 on Eaton's claim for the theft loss.As a result,Eaton recognizes:

Question

Quizplus · Accepted Answer

The loss is an ordinary loss because the equipment was used in a trade or business and was not a capital asset. The loss is the difference between the adjusted basis and the insurance proceeds, which is $8,200.

Thieves Stole Computer Equipment Owned by Eaton Company and Used