If the amount of the insurance recovery for a theft of business property is greater than the asset's fair market value but less than it's adjusted basis, a gain is recognized.

Question

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If the insurance recovery for a theft is greater than the asset's fair market value but less than its adjusted basis, no gain is recognized. The recovery is limited to the adjusted basis of the stolen property, and any excess is treated as a nontaxable recovery of capital.

If the Amount of the Insurance Recovery for a Theft