Problem 7-33 (LO. 3, 4, 8) Olaf lives in the state of Minnesota. In 2020, a tornado hit the area and damaged his home and automobile. Applicable information is as follows: Adjusted FMV FMV Insurance Item Basis before after Proceeds Home $350,000 $500,000 $100,000 $280,000 Auto 60,000 40,000 10,000 20,000 Because of the extensive damage caused by the tornado, the President designated the area a Federal disaster area. Olaf and his wife, Anna, always file a joint return. Their 2019 tax return shows AGI of $180,000 and taxable income of $145,000. In 2020, their return shows AGI of $300,000 and taxable income (exclusive of the casualty loss deduction) of $225,000. Assume the taxpayers are in the 22% tax bracket in 2019 and the 24% tax bracket in 2020. Determine the amount of Olaf and Anna's loss and the year in which they should take the loss. Item Amount of Loss Home Auto Total loss Less: statutory floor amount Loss before statutory % of AGI Amount of loss on last year's return: Loss Less: statutory % of AGI Total loss Amount of loss on current year's return: Loss Less: statutory % of AGI Total loss Olaf and Anna should include the loss on the return, because the tax savings is greater.

Problem 7-33 (LO. 3, 4, 8) Olaf lives in the state of Minnesota. In 2020, a tornado hit the area and damaged his home and automobile. Applicable information is as follows: Adjusted FMV FMV Insurance Item Basis before after Proceeds Home $350,000 $500,000 $100,000 $280,000 Auto 60,000 40,000 10,000 20,000 Because of the extensive damage caused by the tornado, the President designated the area a Federal disaster area. Olaf and his wife, Anna, always file a joint return. Their 2019 tax return shows AGI of $180,000 and taxable income of $145,000. In 2020, their return shows AGI of $300,000 and taxable income (exclusive of the casualty loss deduction) of $225,000. Assume the taxpayers are in the 22% tax bracket in 2019 and the 24% tax bracket in 2020. Determine the amount of Olaf and Anna's loss and the year in which they should take the loss. Item Amount of Loss Home Auto Total loss Less: statutory floor amount Loss before statutory % of AGI Amount of loss on last year's return: Loss Less: statutory % of AGI Total loss Amount of loss on current year's return: Loss Less: statutory % of AGI Total loss Olaf and Anna should include the loss on the return, because the tax savings is greater.

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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