Question

In 2020, Jeremiah earned $42,000 of AGI before considering the following insured casualty losses from seprate...

In 2020, Jeremiah earned $42,000 of AGI before considering the following insured casualty losses from seprate events. The Asset A was damaged in a federal disaster area.   

Fair Market Value

Asset Adjusted Basis     Before   After    Insurance recovery

________________________________________________________________________________________________________________________

A (personal) 9,200 8,000 1,000 2,000

_________________________________________________________________________________________________________________________

B (business) 3,000 4,000 0 4,000

_________________________________________________________________________________________________________________________

C (personal) 3,700 1,700 0 900

________________________________________________________________________________________________________________________

Calculate Jeremiah's casualty results from these incidents. Please show your work.

Business   Accounting   
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Homework Answers

Answer #1

Casualty calculations

The lower of a and b will be taken

a- change in fmv or repairs

b- adjusted basis

A)personal

a - 7000

b- 9200

So, change in fmv is lower

Change in FMV = 7000

less: Insurance. = (2000)

Casualty loss. = 5000-100 =4900

10% of AGI = 4200

Deductible caaualty loss =4900-4200=700

B) business

Adjusted basis = 3000

Less: insurance=(4000)

Casualty gain. = 1000

C) Personal

Adjusted basis= 3700

Less: insurance=(900)

Casualty loss. = 2800-100 =2700

10% of AGI = 4200

Deductible casualty loss = 0

As 10%AGI is more than casualty loss

  

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