Thieves stole computer equipment used by Ms. James in her small business. Ms. James' tax basis in the equipment was zero. One month after the theft, she received a $17,600 reimbursement from her casualty insurance company and used $14,850 to replace the computer equipment. She used the $2,750 remaining reimbursement to purchase a new desk for her office. Which of the following statements is FALSE?

Group of answer choices

Ms. James's basis in her new desk is $2,750.

Ms. James's basis in her new computer equipment is $14,850.

Ms. James's basis in her new computer equipment is -0-.

Ms. James must recognize a $2,750 gain on the involuntary conversion.