Johnny's personal-use classic Ford Mustang, for which he paid $12,000 seven years ago but now worth $20,000, was completely destroyed in ahurricane, which was declared a federal disaster. Johnny does not carry auto insurance. As a result of the hurricane, Johnny missed a businessmeeting and lost out on an order from which he would have earned $3,000. In that same hurricane, Johnny lost his stereo equipment worth$1,600 (purchase price $2,500), along with jewelry valued at $4,000 (purchase price $3,000). Johnny's homeowner's policy covered $5,000 ofthis loss. His adjusted gross income for the year is $80,000.Assuming he can itemize his deductions, calculate his deductible casualty and theft loss.Chacreta

Taxpayer can deduct casualty and theft losses relating to home, household items, and vehicles on…

Answered: Johnny's personal-use classic Ford…

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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Monty loaned his friend Ned $20,000 three years ago. Ned signed a noteand made payments on the loan. Last year, when the remaining balance was$11,000, Ned filed for bankruptcy and notified Monty that he would be unable topay the balance on the loan. Monty treated the $11,000 as a nonbusiness bad debt.Last year, before considering the tax implications of the nonbusiness bad debt,Monty had capital gains of $9,000 and taxable income of $45,000. During the currentyear, Ned paid Monty $10,000 in satisfaction of the debt. Determine Monty’stax treatment for the $10,000 received in the current year.
Langstraat, age seventeen, owned a motorcycle that he insured against liability with Midwest Mutual Insurance Company. He signed a notice of rejection attached to the policy indicating that he did not desire to purchase uninsured motorists’ coverage from the insurance company. Later he was involved in an accident with another motorcycle owned and operated by a party who was uninsured. Langstraat now seeks to recover from the insurance company, asserting that his rejection was not a valid rejection because he is a minor. Can Langstraat recover from Midwest? Explain.
Please advise on how to solve it.
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?
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?
Dan sells his expensive sports car to his brother for $100. The next week, Dan files for bankruptcy under Chapter 7. Regarding the sale of the car, the trustee may 1) not cancel it, but can sue Dan's brother for return of the $100. 2) cancel it as a voidable preference. 3) not cancel it because it is a sale, not a gift. 4) cancel it as a fraudulent transfer.
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 -----------
Carolina's house burned and she lost household items worth a total of $50,000. House insured for $160,000, homeowner's policy coverage personal belongings up to 55% of insured value of the house.Calculate how much insursance coverage policy provides personal belongings and will she recieve payment for belongings?
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?
Christ owns a factory building that he has used in his business for many years. On 1/28/20, the factory was totally destroyed in a fire. Christ received $ 5,000,000 from his insurance company for this total loss. At the time of this loss, Christ had an adjusted basis in this factory of $ 2,000,000 ($ 3,000,000 original cost less $ 1,000,000 in accumulated straight-line tax depreciation). Christ replaced the factory at a cost of $ 4,800,000 in November of 2020. Calculate Christ’s 2020 realized gain of loss from the above How much gain or loss will Christ recognize for tax purposes in 2020? How much additional federal tax will Christ incur in 2020 assuming his marginal ordinary income tax rate is 37% and his net capital gain rate is 20%? What is Christ’s tax basis in the replacement factory building?
Juanita is the owner of a 30-year-old home, and is looking to buy a homeowner’s insurance policy. The previous home she owned was severely damaged by a tree falling through the roof, a peril that was not covered by her basic-form policy, therefore she is looking to buy a comprehensive policy that covers damage from all perils (except those specifically excluded). Based on the peril coverage it offers, she purchases an insurance policy.

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