Thieves Stole Computer Equipment Owned by Eaton Company and Used

Multiple Choice

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:

A) $35,000 ordinary loss
B) $8,200 Section 1231 loss
C) $8,200 ordinary loss
D) None of these choices are correct