On October 18 of last year, a flood washed away heavy construction equipment owned by Company K. The adjusted tax basis in the equipment was $416,000. On December 8 of last year, Company K received a $480,000 reimbursement from its insurance company. On April 8 this year, Company K purchased new construction equipment for $450,000.

a.How much of last year's gain must Company K recognize because of the involuntary disposition of the equipment?

b.What is Company Ks tax basis in the new equipment?

c.How would your answers change if Company K paid $492,000 for the new equipment?