Larry is the sole proprietor of a trampoline shop. During 2016, the following transactions occurred:

Larrys trampoline stretching machine (owned two years) was stolen on May 5, but the business's insurance company will not pay any of the machines value because Larry failed to pay the insurance premium. The machine had a fair market value of $8,000 and an adjusted basis of $6,000 at the time of theft.

what are the amount and nature of recognized gain or loss?