Riley operates a plumbing business, and this year the three-year-old van he used in the business was destroyed in a traffic accident. The van was originally purchased for $20,800, and the adjusted basis was $5,700 at the time of the accident. Although the van was worth $6,080 at the time of accident, insurance only paid Riley $1,300 for the loss. What is the amount of Riley's casualty loss deduction?

Riley operates a plumbing business, and this year the three-year-old van he used in the business was destroyed in a traffic accident. The van was originally purchased for $20,800, and the adjusted basis was $5,700 at the time of the accident. Although the van was worth $6,080 at the time of accident, insurance only paid Riley $1,300 for the loss. What is the amount of Riley's casualty loss deduction?

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter7: Property Transactions: Basis, Gain And Loss, And Nontaxable Exchanges

Section: Chapter Questions

Problem 5BCRQ

See similar textbooks

Similar questions

Chad owned an office building that was destroyed in a tornado. The area was declared a Federal disaster area. The adjusted basis of the building at the time was 890,000. After the deductible, Chad received an insurance check for 850,000. He used the 850,000 to purchase a new building that same year. How much is Chads recognized loss, and what is his basis in the new building?
On July 24 of the current year, Sam Smith was involved in an accident with his business use automobile. Sam had purchased the car for 30,000. The automobile had a fair market value of 20,000 before the accident and 8,000 immediately after the accident. Sam has taken 20,000 of depreciation on the car. The car is insured for the fair market value of any loss. Because of Sams history, he is afraid that if he submits a claim, his policy will be canceled. Therefore, he is considering not filing a claim. Sam believes that the tax loss deduction will help mitigate the loss of the insurance reimbursement. Sams current marginal tax rate is 35%. Write a letter to Sam that contains your advice with respect to the tax and cash flow consequences of filing versus not filing a claim for the insurance reimbursement for the damage to his car. Also prepare a memo for the tax files. Sams address is 450 Colonels Way, Warrensburg, MO 64093.
Marvin broke his hip in a slip and fall accident at Costco. He received an accident settlement from Costco’s insurance company for $25,000. He was unable to work during the two-month recovery period but was able to use the $5,000 in sick pay he had accumulated from his employer. Marvin also received $10,000 from an accident policy he had purchased for himself. How much of this income is taxable to Marvin.
This year, Amy purchased $4,200 of equipment for use in her business. However, the machine was damaged in a traffic accident while Amy was transporting the equipment to her business. Note that because Amy did not place the equipment into service during the year, she does not claim any depreciation or cost recovery expense for the equipment. a. After the accident, Amy had the choice of repairing the equipment for $2,690 or selling the equipment to a junk shop for $475. Amy sold the equipment. What amount can Amy deduct for the loss of the equipment? Deductible amount
Fenwick operates a grocery store and his retail building was completely destroyed by a hurricane on August 22, Year 10. The fair market value of the building before the hurricane was $1,200,000 with an adjusted basis of $800,000. His insurance company reimbursed him $1,200,000 of December 2, Year 10. When is the last date that Fenwick can replace this building with qualifying property and avoid recognizing gain from this transaction?
Don operates a taxi business, and this year one of his taxis was damaged in a traffic accident. The taxi was originally purchased for $17,500, and the adjusted basis was $1,350 at the time of the accident. The taxi was repaired at a cost of $2,825 and insurance reimbursed Don $739 of this cost. What is the amount of Don's casualty loss deduction? Multiple Choice $611 $2,825 $2,086 $1,350 Don is not eligible for a casualty loss deduction
Leo bought a used car for $4,500. While in class at George Brown, his car was damaged by an unidentified automobile. The damage to the vehicle was estimated at $1,000. If the cash value of Leo's car at the time of the loss is $3,000, how much money would Leo receive if he files a claim for damages? Assume he has an Ontario Automobile Insurance policy with a $500 deductible and all perils coverage. $3,000 $2,500 $1,000 $500 None of the above. He's not covered.
Alma is in the business of dairy farming. During the year, one of her barns was completely destroyed by fire. The adjusted basis of the barn was $90,000. The fair market value of the barn before the fire was $75,000. The barn was insured for 95% of its fair market value, and Alma recovered this amount under the insurance policy. She has adjusted gross income of $40,000 for the year (before considering the casualty). Determine the amount of loss she can deduct on her tax return for the current year.
Don operates a taxi business, and this year one of his taxis was damaged in a traffic accident. The tax was originally purchased for $23,000, and the adjusted basis was $1.700 at the time of the accident. The tax was repaired at a cost of $2.650 and insurance reimbursed Don $718 of this cost. What is the amount of Don's casualty loss deduction? Mutiple Choice O O O $982 $2,650 $1932 $1700 Doo in not eligible for a casualty loss deduction
Roberta was involved in an automobile accident in 2021. Her car was used 60% for business and 40% for personal use. The car had originally cost $40,000. At the time of the accident, the car was worth $20,000 and Alicia had taken $8,000 of depreciation. The car was totally destroyed and Roberta had let her car insurance expire. If her AGI is $50,000 (before considering the loss), determine her AGI and itemized deduction for the casualty loss. a.$50,000; $-0-. b.$34,000; $4,500. c.$26,000; $5,700. d.$34,000; $-0-.
Sally is an employee of Blue Corporation. Last year, she purchased a very expensive computer with her own funds. She used the computer 100% for business purposes. During the current year, the computer was completely destroyed in a fire. Blue Corporation did not reimburse her for her loss. Discuss whether Sally’s loss will create or increase Sally’s net operating loss. How does Sally treat the loss (carryback or/and carryforward periods)? If a taxpayer who sustains a casualty loss in an area designated by the President of the United States as a disaster area, he or she may take the loss in the year in which the loss occurred or elect to take the loss in the previous year. Identify factors that should be considered in deciding in which year to take the loss
Rebecca Botson purchased a personal residence for $286,000. It had a fair market value of $300,000 in the current year when it was damaged by a flood that resulted in the entire area being declared a federal disaster area. The fair market value after the flood was $240,000 and insurance proceeds totaled $15,000. What is the net amount of federal casualty loss she can claim if her adjusted gross income is $120,000?