Jewel’s home was completely destroyed by a wildfire in 2019 in an area declared a national...

Jewel’s home was completely destroyed by a wildfire in 2019 in an area declared a national disaster. The building had an appraised value of $185,000 before the fire. Four years ago Jewel paid $160,000 for the house and the land, with $25,000 of the price allocated to the land. What is Jewel’s loss on the fire, assuming no insurance? What is her deductible loss if her adjusted gross income is $40,000? What is Jewel’s realized gain or loss if she receives $190,000 from the insurance company to rebuild the home?

Expert Solution

Particulars	Amount
Cost of property	160,000
Less: land cost	(25,000)
Cost of building	135,000
Loss on the fire	135,000

Loss on the fire	135,000
Less: 10% of AGI	(4,000)
Deductible	(100)
Deduction	130,900

Cash received	190,000
Less: cost of building	(135,000)
Realized gain	55,000

ekkarill92 answered 3 years ago

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