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An office machine used by Josie in her accounting business was completely destroyed by fire. The...

An office machine used by Josie in her accounting business was completely destroyed by fire. The adjusted basis of the machine was $8,000 (original basis of $14,000 less accumulated depreciation of $6,000). The machine was not insured. Calculate the amount and nature of Josie's gain or loss as a result of this casualty.

Amount of gain or loss

Nature

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Answer #1

CALCULATION OF THE GAIN OR LOSS ON MACHINE ON DESTROYED BY FIRE

Original basis of Machine = $ 14,000

Less: Accumulated Depreciation = $ 6,000

Loss = $ 8,000

Assets is not insured so there is no amount is recovered from the insurance company and loss is ordinary loss.

Answer =

Nature of Loss = Ordinary

Loss = Loss is Equal to adjusted basis of machine = $ 8,000

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