Knox Operated a Business Which Was Damaged by a Hurricane

Essay

Knox operated a business which was damaged by a hurricane.His losses were as follows:
$\begin{array}{rrrrrrr}&&&&\text { Insurance }\\\text { Asset } & \text { Basis } & \text { FMV Before } & \text { FMV After } &\text { Proceeds }\\1 & \$ 3,000 & \$ 6,000 & \$ 0& 5,000 \\2 & 45,000 & 65,000 & 0 & 75,000 \\3 & 7,200 & 15,000 & 0 & 0\end{array}$ a.What is Knox's net casualty loss (if any)assuming his AGI is $85,000 prior to the deduction? Assume he properly replaced all assets.
b.What is his basis in replacement Asset 1 purchased for $8,000 assuming Knox elected the non-recognition of gain from an involuntary conversion?