In: Accounting
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?
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 |