Question

A flood damaged an auto owned by Mr. and Mrs. North on August 1 of this...

A flood damaged an auto owned by Mr. and Mrs. North on August 1 of this year. The car was only used for personal purposes.

Fair market value before the flood

$17,500

Fair market value after the flood

2,500

Cost basis

22,500

Insurance proceeds

12,500

Adjusted gross income for this year

20,000

Business use of auto

0

Based on these facts, what is the amount of the South's casualty loss deduction after limitations for this year?

A) $400

B) $2,500

C) $5,000

D) $20,000

Business   Accounting   
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Homework Answers

Answer #1

Answer- Car is used for only personal purpose only . Business use of the car was zero.

Deduction from gross income is allowed for only those item which is used in business or business purpose.NO deduction is allowed for these any which are not business realted item or used in business.

But South's casualty personal loss is = Fair market value of the car-- Insurance Proceeds

=$17500-$12500

=$5000

Note- When we recieved insuance claim form any company ,salvage value of that assets is used by that insurance company.

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