Heather owns a two-story building. The building is used 40% for business and 60% for personal use. During 2020, a fire caused major damage to the building and its contents. Heather purchased the building for $800,000 and has taken depreciation of $100,000 on the business portion. At the time of the fire, the fair market value was $900,000. Immediately after the fire, the fair market value was $200,000. The insurance recovery on the building was $600,000. The contents of the building were insured for any loss at fair market value. The business assets had an adjusted basis of $220,000 and a fair market value of $175,000. These assets were totally destroyed. The personal use asset had an adjusted basis of $50,000 and a fair market value of $65,000. These assets were also totally destroyed. If Heather's AGI is $100,000 before considering the effects of the fire, determine her itemized deduction as a result of the fire. Also determine Heather's AGI
Heather owns a two-story building. The building is used 40% for business and 60% for personal use. During 2020, a fire caused major damage to the building and its contents. Heather purchased the building for $800,000 and has taken
| Heather's AGI is $100,000 before considering the effects of the fire. Determine her itemized deduction and AGI after considering the effects of the fire. | |||||||||
| Adjusted Gross Income | |||||||||
| AGI before the effects of the fire | $100,000 | ||||||||
| Business gain - building | $ 20,000 | ||||||||
| Business loss - contents | $ -45,000 | ||||||||
| Net business casualty loss | $ -25,000 | ||||||||
| Personal casualty gain | $ 15,000 | ||||||||
| Personal casualty loss to extent of gain | $ -15,000 | ||||||||
| Net personal casualty gain | $ 0 | ||||||||
| AGI | $ 75,000 | ||||||||
| Itemized Deduction | |||||||||
| Balance of personal casualty loss | $ 0 |
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