Jewel's home was completely destroyed by a wildfire in 2018 in an area declared a national...

Jewel's home was completely destroyed by a wildfire in 2018 in an area declared a national disaster. The building had an appraised value of $185,000 before the fire. For years ago Jewel paid $160,000 for the house and the land, with $25,000 of the price allocated to the land.

a. what is Jewel's loss on the fire, assuming no insurance?

b. what is her deductible loss if her adjusted gross income is $40,000

c. what is Jewel's realized gain or loss if she receives $190,000 from the insurance company to rebuild the home?

d. what is her recognized gain if she uses only $130,000 of the insurance proceeds to rebuild a smaller replacement residence in the same land?

Expert Solution

a.) Jewel's loss on fire.

Amount paid for building = $160,000 - $25000

= $135,000

b.) As per GAAP

Loss minus $100 on each asset

$135,000 - $100 = $134,900

C.) Gain - $190,000 - $134,900 = $55,100

D.) Gain - $190,000 - $134,900 = $55,100

In case D if jewels uses the money more then the value of loss then the gaun should have been reimbursemnet value less replacement property value

ekkarill92 answered 2 years ago

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