Orange Company had machinery destroyed by a fire on December 23,2014.The machinery had been acquired on April 1,2012,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

Since the machine was held more than 12 months and was depreciated,it was a § 1231 asset.However,since it was disposed of at a $15,800 gain ($30,000 insurance proceeds - $14,200 adjusted basis),all of the gain is initially § 1245 depreciation recapture gain and not casualty gain.

Orange Company Had Machinery Destroyed by a Fire on December