Derrick owns a farm in eastern North Carolina. A hurricane hit the area (a national disaster area was declared) and destroyed a farm building and some farm equipment and damaged a barn. Item Building Equipment Barn Adjusted Basis $ 123,300 80,200 122,700 FMV before Damage $ 177,000 55,900 197,700 a-1. Loss amount a-2. Last year a-2. Current year FMV after Damage $0 0 122,700 Insurance Proceeds $ 69,600 19,600 57,900 Due to the extensive damage throughout the area, the president of the United States declared all areas affected by the hurricane as a disaster area. Derrick, who files a joint return with his wife, had $57,000 of taxable income last year. Their taxable income for the current year is $186,000, excluding the loss from the hurricane. Required: a-1. Calculate the amount of the loss deductible by Derrick and his wife. a-2. What amount of loss should be adjusted against current and last year?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Derrick owns a farm in eastern North Carolina. A hurricane hit the area (a national disaster area was declared) and destroyed a farm
building and some farm equipment and damaged a barn.
Item
Building
Equipment
Barn
Adjusted
Basis
$ 123,300
80, 200
122,700
FMV before
Damage
$ 177,000
55,900
197,700
a-1. Loss amount
a-2. Last year
a-2. Current year
FMV after
Damage
$0
0
122,700
Insurance
Proceeds
$ 69,600
19,600
57,900
Due to the extensive damage throughout the area, the president of the United States declared all areas affected by the hurricane as a
disaster area. Derrick, who files a joint return with his wife, had $57,000 of taxable income last year. Their taxable income for the
current year is $186,000, excluding the loss from the hurricane.
Required:
a-1. Calculate the amount of the loss deductible by Derrick and his wife.
a-2. What amount of loss should be adjusted against current and last year?
Transcribed Image Text:Derrick owns a farm in eastern North Carolina. A hurricane hit the area (a national disaster area was declared) and destroyed a farm building and some farm equipment and damaged a barn. Item Building Equipment Barn Adjusted Basis $ 123,300 80, 200 122,700 FMV before Damage $ 177,000 55,900 197,700 a-1. Loss amount a-2. Last year a-2. Current year FMV after Damage $0 0 122,700 Insurance Proceeds $ 69,600 19,600 57,900 Due to the extensive damage throughout the area, the president of the United States declared all areas affected by the hurricane as a disaster area. Derrick, who files a joint return with his wife, had $57,000 of taxable income last year. Their taxable income for the current year is $186,000, excluding the loss from the hurricane. Required: a-1. Calculate the amount of the loss deductible by Derrick and his wife. a-2. What amount of loss should be adjusted against current and last year?
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