Question

In: Accounting

Tim suffered greatly this year. In January a freak storm damaged his sailboat and in July...

Tim suffered greatly this year. In January a freak storm damaged his sailboat and in July Tim's motorcycle was stolen from his vacation home. Tim originally paid $28,650 for the boat, but he was able to repair the damage for $9,800. Tim paid $14,800 for the motorcycle, but it was worth $16,850 before it was stolen. Insurance reimbursed $1,420 for the boat repairs and the cycle was uninsured.


a. Calculate Tim's deductible casualty loss if his AGI is $46,000.

Solutions

Expert Solution

Sail Boat Motor Cycle

Decline in value or repair cost $ 9800        $ 16850

Adjusted basis                                            $ 28650      $ 14800

Lesser of basis or value                              $ 9800        $ 14800

Less : insurance proceeds - $ 1420

uninsured loss                                            $ 8380        $ 14800

Per casualty floor-                                      - $ 100        - $ 100

Casualty Loss                                             $ 8280        $ 14700

Tim must reduce this by 18 % of his AGI which is $ 8280 ($46000*18%).

Hence, Tim can claim a $ 14700 casualty loss deduction this year.

ekkarill92 answered 1 year ago
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