Question: David Price owned machinery which he had acquired in 2010 at a cost of $100,000. During 2011, the machinery was destroyed by fire. At that

David Price owned machinery which he had acquired in 2010 at a cost of $100,000. During 2011, the machinery was destroyed by fire. At that time it had an adjusted basis of

$86,000. The insurance proceeds awarded to Price amounted to $125,000, and he immediately acquired a similar machine for $110,000.

What should Price report as ordinary income resulting from the involuntary conversion for 2011?

a. $14,000

b. $15,000

c. $25,000

d. $39,000

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