1. BeBe had a tough year! She had two different unfortunate casualties during the year. First, her car was in an accident. Her car had a value of $20,000. Herbasis (her cost) had been $30,000. After the accident, the value was reduced to only $10,000. Her insurance company reimbursed her for $3,000 only.Second, she had a separate free-standing storage she on her property, which burned down. The shed had a fair market value of $4,000, and a cost adjustedbasis to BeBe of $3,500. Her insurance company reimbursed her $3,000 for her loss. If BeBe's adjusted gross income is S60,000, what is her deductiblecasualty loss, if any?

Deductions for the loss are those allowable or standard deductions which the taxpayer is allowed to…

Answered: 1. BeBe had a tough year! She had two…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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LO.4 Belinda was involved in a boating accident in 2020. Her speedboat, which was used only for personal use and had a fair market value of $28,000 and an adjusted basis of $14,000, was completely destroyed. She received $10,000 from her insurance company. Her AGI for 2020 is $37,000. What is Belinda’s casualty loss deduction (after any limitations)?
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Nell, Nina, and Nora Potter, who are sisters, sell their principal residence (owned as tenants in common) in which they have lived for the past 25 years. The youngest of the sisters is age 60. The selling price is $960,000, selling expenses and legal fees are $63,000, and the adjusted basis is $120,000 (the fair market value of the residence when inherited from their parents 25 years ago; they made no capital improvements during the time they held the residence). The sisters plan to move into rental housing and not acquire another residence. Nell has contacted you on behalf of the Potters regarding the tax consequences of the sale.a. Write a letter to Nell advising her of the tax consequences and how taxes can be minimized. Nell’s address is 100 Oak Avenue, Billings, MT 59101.b. Prepare a memo discussing your approach to the situation for the tax files.
Your cousin lost her job because of the pandemic and used her credit card up to her $20,000 limit in order to pay bills. But she hasn’t found another job, so had to call the credit card company and explain that she had zero money with which to pay her bill, had zero assets that could be sold for cash, and had a pile of other debts besides. The credit card company did its due diligence, concluded that yes your cousin was a lost cause, then wrote off the entire $20,000 as uncollectible. Code § 61(a) includes “discharge of indebtedness” as an example of “gross in-come.” So your cousin will be taxable on that $20,000, right? Wrong? Why?
An individual purchased a warehouse as an investment property two years ago. During the current year, he received rents of $8,000 and paid the following expenses: interest of $6,000, property taxes of $2,000, heat, light and power of $500, and maintenance of $300. The UCC of this Class 1 asset was $60,000 on January 1 of the current year. He cannot claim a rental loss in the current year. True or False
Jorge and his wife own a beachfront vacation home in Savannah, Georgia. During the year, high winds from a tropical storm shatter a sliding glass door and rain from the storm causes extensive water damage to the kitchen. The Savannah area qualified for federal disaster relief. Fortunately, during a calm in the storm, Jorge is able to board up the door, which limits the water damage to the kitchen. The items damaged in the storm are: Cost ValueBefore ValueAfter InsuranceProceeds Kitchen furniture $2,085 $1,325 $430 $510 TV 265 200 0 115 Refrigerator 1,000 920 90 775 Linoleum flooring 1,645 880 0 470 In addition, Jorge pays $610 to replace the sliding glass door. The insurance company will not reimburse him for the cost of the new door because the old sliding glass door did not meet the company's standards for a hurricane area. The amount of Jorge's casualty loss before considering any annual limitations that may apply is…
Bill recently had his truck slide off a gravel road and strike a tree. Bill's vehicle suffered $17,500 in damage. The truck has a book value of $40,000. Bill carried collision insurance with a $500 deductible. How much will Bill be reimbursed by his policy?
Susan owned a restaurant in Key West, Florida that was destroyed by a hurricane. The restaurant had an adjusted basis of $589,000 when the hurricane hit. Susan had insurance coverage on the restaurant and received a check for $745,500. She purchased a new restaurant four months after receiving the insurance check for $633,500. Assume Susan wants to minimize gain if possible. What is Susan's realized gain/loss? (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Susan's (b) What is Susan's recognized gain/loss? (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Susan's ✓ is $ recognized gain -----------
Melody (single) had her home by the state condemned department of transportation. Her basis in the house was $200,000. She received a net condemnation award of $500,000. Rather than replace the property, Melody decided to rent an apartment. Melody had owned the home and used it as her main home for the ten years prior to the condemnation. How much gain does Melody report from the sale? a. $0 b.$50,000 c.$250,000 d.$300,000
Last year, Thea and Rory Brown bought a home with a dwelling replacement value of $350,000 and insured it (via an HO-5 policy) for $310,000. The policy reimburses actual cash value and has a $500 deductible, standard limits for coverage C items, and no scheduled property. Recently, burglars broke into the house and stole a two-year-old television set with a current replacement value of $600 and an estimated useful life of eight years. They also took jewelry valued at $1,850 and silver flatware valued at $3,000. Make sure to account for depreciation. If the Browns’ policy has an 80 percent co-insurance clause, do they have enough insurance? Assuming a 50 percent coverage C limit, calculate how much the Brown family would receive if they filed a claim for the stolen items. What advice would you give the Brown family about their homeowner’s coverage?
Igor owns a rental house and had to paint the living room, kitchen and bathroom after the most recent tenant moved out. The rooms had not been painted in the last five years and he worried he would not be able to rent it out to another tenant at the current fair market value if he didn’t repaint. The cost to repaint the three rooms was $1,500 ($1,000 labor and $500 paint). What amount, if any, can Igor deduct of this expense and on what form should it be listed?
Last year, Jose and Josefina Munoz bought a home with a dwelling replacement value of $250,000 and insured it (via an HO-5 policy) for $225,000. The policy reimburses actual cash value and has a $500 deductible, standard limits for coverage C items, and no scheduled property. Recently, burglars broke into the house and stole a new computer with a current replacement value of $1,500 and an estimated useful life of three years. They also took jewelry valued at $2,500 and a coin collection valued at $1,500. If the Munozs’ policy has a 90 percent co-insurance clause, do they have enough insurance? Assuming a 50 percent coverage C limit, calculate how much the Munoz family would receive if they filed a claim for the stolen items. What advice would you give the Munoz family about their homeowner’s coverage?

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