Mega Ltd., which has a May 31 year end, had its factory vandalized in August 2011. The vandals managed to completely destroy a valuable piece of machinery. This was a custom-designed manufacturing asset included in class 43 and is the only asset in the class. The destroyed machinery had an original cost of $500,000 and an undepreciated capital cost of $71,430. Mega received insurance proceeds of $345,000 for the destroyed machinery. Due to advances in technology, a new machine cost only $280,000 and was in place for use by December 1, 2011. 

What is the impact on income for tax purposes to Mega for its taxation year ended May 31, 2012 in respect of the machinery?

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