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An office machine used by Josie in her accounting business was completely destroyed by fire. The adjusted basis of the machine was $41,450 (original basis of $62,175 less accumulated depreciation of $20,725). The machine was not insured.

Calculate the amount and nature of Josie's gain or loss as a result of this casualty. (Assume this is the taxpayer's only casualty gain or loss.)

Amount of gain or loss?

a-Capital gain

b-Capital loss

c-Ordinary gain

d-Ordinary loss