Tony's Factory Building Was Destroyed in a Fire (Adjusted Basis

Multiple Choice

Tony's factory building was destroyed in a fire (adjusted basis of $90,000;fair market value of $140,000) .Of the insurance proceeds of $128,000 he receives,Tony uses $88,000 to purchase additional inventory and invests the remaining $40,000 in short-term certificates of deposit.What is Tony's recognized gain or loss?

A) $0.
B) $12,000 loss.
C) $38,000 gain.
D) $40,000 gain.
E) None of the above.