*Please clearly indicate which answer is for what part.* Tim suffered greatly th
ID: 2397034 • Letter: #
Question
*Please clearly indicate which answer is for what part.*
Tim suffered greatly this year. In January a freak storm damaged his sailboat and in July Tim's motorcycle was stolen from his vacation home. Tim originally paid $30,600 for the boat, but he was able to repair the damage for $7,050. Tim paid $18,050 for the motorcycle, but it was worth $19,600 before it was stolen. Insurance reimbursed $1,540 for the boat repairs and the cycle was uninsured.
a. Calculate Tim's deductible casualty loss if his AGI is $38,500.
b. Calculate Tim's deductible casualty loss if his AGI is $137,500.
c. How would you answer a. if Tim received an additional $44,725 in interest from municipal bonds this year?
Explanation / Answer
Boat Motorcycle Decline in Value $ 7,050 $ 19,600 Adjusted Basis $ 30,600 $ 18,050 Lesser of basis or Value $ 7,050 $ 18,050 Less: Insurance proceeds $ 1,540 $ - Uninsured Loss $ 5,510 $ 18,050 Less: Per Casualty floor $ 100 $ 100 Casualty loss $ 5,410 $ 17,950 a. Tim must reduce this 10% of his AGI which is $3,850 ($38,500 X 10%) Tim can claim a Casuality loss of $19,510. ($5,410 + $17,950 - $3,850) Tim's deductible casuality loss = $19,510 b. Tim must reduce this 10% of his AGI which is $13,750 ($1,37,500 X 10%) Tim can claim a Casuality loss of $9,610. ($5,410 + $17,950 - $13,750) Tim's deductible casuality loss = $9,610 c. The interest on municipal bond is excluded from gross income so this income would not affect Tim's AGI and would not, therefore have any effect on the casuality loss deduction. Tim's deductible casuality loss deduction would still be $19,510 Tim's deductible casuality loss = $19,510
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