Question

In: Accounting

John bought a car three years ago for $20,000 for personal use.  In 2002, his car was...

John bought a car three years ago for $20,000 for personal use.  In 2002, his car was totally destroyed by a tree that fell on the car.  John did not have insurance that covered this event.  The car’s fair market value before the tree came down was $9,000 and it was worth $0 after the accident.  He has no other personal casualty gains or losses and his AGI for the year was $50,000.  John’s personal casualty loss is $8,000. True/False and Explain.

Solutions

Expert Solution

False

loss caused =9000

persona casulty loss =9000-(100-10% of AGI)

=9000-100-5000

=3900

To calculate the casualty loss deduction for personal-use property in an area declared a federal disaster, you must take the following three steps:

  1. Subtract any insurance proceeds.
  2. Subtract $100 per casualty event.
  3. Combine the results from the first two steps and then subtract 10% of your adjusted gross income (AGI) for the year you claim the loss deduction.
  4. For example, suppose you sustained a $50,000 loss to your home (after considering insurance reimbursements) due to a federally declared disaster in 2018. Your AGI for last year was $150,000. Your deductible loss is $34,900 ($50,000 – $100 – $15,000).
  5. I hope my workings are enough to understand
    Thanks in advance for giving me positive ratings
    for any clarification feel free to comment on it
    May God bless you and have a wonderful day

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