Thieves Stole Computer Equipment Used by Ms

Multiple Choice

Thieves stole computer equipment used by Ms. James in her small business. Ms. James' tax basis in the equipment was zero. One month after the theft, she received a $17,600 reimbursement from her casualty insurance company and used $14,850 to replace the computer equipment. She used the $2,750 remaining reimbursement to purchase a new desk for her office. Which of the following statements is false?

A) Ms. James must recognize a $2,750 gain on the involuntary conversion.
B) Ms. James's basis in her new computer equipment is -0-.
C) Ms. James's basis in her new desk is $2,750.
D) None of these choices are false.