On July 1, 2018 a strong storm came through NW Michigan and knocked down a tree...

On July 1, 2018 a strong storm came through NW Michigan and knocked down a tree that crushed one-half of the c corporation furniture warehouse. The fair market value at the time of the storm was $500,000. The original cost of the warehouse was $600,000. The depreciation deduction that the company claimed $200,000. On Seprember 1, 2018 the company received insurance proceeds of $50,000 related to damage from the storm. The company believes the damage to half of the warehouse should be reported as a casualty loss for tax purposes. What would be a casualty loss?

Solutions

Expert Solution

A casualty loss occurs when there is a property damage from sudden, unanticipated event.

The tax payer can claim casualty loss in the year it occurs

Note: it is not mentioned in the question that the area or taxpayer is within the federally declared disaster area or not

Amount of loss:

1) Determine the adjusted basis in the property before the casualty

Adjusted amount = original cost ($600,000) - depreciation($200,000)

Adjusted amount = $400,000

2) Determine the decrease in fair market value(FMV) of the property as a result of casualty. Amount of Fair market value is $500,000

Note:- no information is provided regarding the decrease in fair market value due to casualty. The amount for fair market value will be taken as $500,000.

3)Subtract any insurance proceeds from the smaller of the amounts determined in 1) and 2)

Insurance proceeds $50,000

Smaller amount $400,000

Smaller amount - insurance proceeds

$400,000 - $50,000 =$350,000 as a casualty loss.

Casualty loss =$350,000.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

An immature, eight-inch, reddish-colored pine cone was knocked down from a tree during a recent storm....

An immature, eight-inch, reddish-colored pine cone was knocked down from a tree during a recent storm. Which structure or structures does the cone likely contain at this point? Select all that apply. A) Archegonium B) Megasporangium C) Microsporangium D) Integuments

The Hebrides Macaque sleeps upside down, hanging off of tree branches by its thick, strong tail....

The Hebrides Macaque sleeps upside down, hanging off of tree branches by its thick, strong tail. The body-length, mass, tail length, and tail diameter (or 'thickness') is measured in a population of these monkeys. The dimensions for a particular juvenile specimen are as follows: Body length: 35 cm Mass: 13 kg Unstrained tail length: 30 cm Tail thickness: 3 cm (a) Assuming that the tail is essentially cylindrical and acts under tension as an elastic material with Young's modulus 4.5××1066...

On 1 July 2018 Charter Ltd issues through private placement $10 million in 5-year debentures that...

On 1 July 2018 Charter Ltd issues through private placement $10 million in 5-year debentures that pay coupon interest on a yearly basis at a coupon rate of 10 percent per annum. At the time of issuing the securities, the market requires a rate of return of 12 percent per annum. Interest expense is determined using the effective interest method. Required Determine the issue price (show all workings). (2 Mark) Provide the journal entries (show all workings) at: 1 July...

The general ledger of Red Storm Cleaners at January 1, 2018, includes the following account balances:...

The general ledger of Red Storm Cleaners at January 1, 2018, includes the following account balances: Accounts Debits Credits Cash $ 19,000 Accounts Receivable 7,800 Supplies 3,800 Equipment 14,000 Accumulated Depreciation $ 4,600 Salaries Payable 6,600 Common Stock 24,000 Retained Earnings 9,400 Totals $ 44,600 $ 44,600 The following is a summary of the transactions for the year: March 12 Provide services to customers, $58,000, of which $20,800 is on account. May 2 Collect on accounts receivable,...

The general ledger of Red Storm Cleaners at January 1, 2018, includes the following account balances:...

The general ledger of Red Storm Cleaners at January 1, 2018, includes the following account balances: Accounts Debits Credits Cash $ 13,500 Accounts Receivable 6,700 Supplies 2,700 Equipment 16,500 Accumulated Depreciation $ 5,600 Salaries Payable 8,100 Common Stock 18,500 Retained Earnings 7,200 Totals $ 39,400 $ 39,400 The following is a summary of the transactions for the year: March 12 Provide services to customers, $47,000, of which $19,700 is on the account. May 2 Collect on accounts...

The general ledger of Red Storm Cleaners at January 1, 2018, includes the following account balances:...

The general ledger of Red Storm Cleaners at January 1, 2018, includes the following account balances: Accounts Debits Credits Cash $ 12,000 Accounts Receivable 6,400 Supplies 2,400 Equipment 18,000 Accumulated Depreciation $ 6,200 Salaries Payable 8,700 Common Stock 17,000 Retained Earnings 6,900 Totals $ 38,800 $ 38,800 The following is a summary of the transactions for the year: March 12 Provide services to customers, $44,000, of which $19,400 is on account. May 2 Collect on accounts receivable,...

9, Dawn (single) purchased her home on July 1, 2008. On July 1, 2018, Dawn moved...

9, Dawn (single) purchased her home on July 1, 2008. On July 1, 2018, Dawn moved out of the home. She rented out the home until July 1, 2019, when she sold the home and realized a $230,000 gain (assume none of the gain was attributable to depreciation). What amount of the gain is Dawn allowed to exclude from her 2019 gross income? Multiple Choice $0. $23,000. $207,000. $230,000. 13, Harvey rents his second home. During the year, Harvey reported...

Strong Co. purchased a trademark from Wall Co. for $60,000 on July 1, 2019. Expenditures of...

Strong Co. purchased a trademark from Wall Co. for $60,000 on July 1, 2019. Expenditures of $10,000 for successful litigation in defence of the trademark were paid on July 1, 2021. Strong estimates that the useful life of the trademark will be 20 years from the date of acquisition. Required Calculate the carrying value of the trademark at December 31, 2021.

Journalize the following information: The following events occur in July, 2018: July 1: You take $10,000...

Journalize the following information: The following events occur in July, 2018: July 1: You take $10,000 from your personal savings account and buy common stock in Peyton Approved. July 1: Purchase $6,500 in baking supplies from vendor, on account. July 3: Your parents lend the company $10,000 cash in exchange for a two-year, 6% note payable. Interest and the principal are repayable at maturity. July 7: Enter into a lease agreement for bakery space. The agreement is for 1 year....

II. On October 1, 2018, Raven Company issued $400,000 par value bonds dated July 1, 2018....

II. On October 1, 2018, Raven Company issued $400,000 par value bonds dated July 1, 2018. The 10-year bonds have a stated rate of 10% and pay interest semiannually on January 1 and July 1. The bonds are issued at $454,200 plus accrued interest, and yield 8%. The effective interest method is used. Required: Prepare the journal entry at the date the bond are issued. Prepare the adjusting entry at December 31, 2018. Prepare the entry for interest payment on...

Subjects