A fire damaged industrial equipment used by Firm L in its manufacturing process. Immediately before the fire, the equipment was worth $40,000. After the fire, the equipment was worth only $15,000. Firm L's adjusted basis in the equipment was $14,000, and it received only $10,000 insurance reimbursement for its loss.

Identify the tax issue or issues suggested by the following situations, and state each issue in the form of a question