A flood damaged an auto owned by Mr. and Mrs. North on August 1 of this year. Th
ID: 2508323 • Letter: A
Question
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
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
Explanation / Answer
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.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.