In 2014,the Chens' pleasure boat was severely damaged by a hurricane in an area that was declared a federal disaster area.They had AGI of $110,000 in 2014.The following information relates to the craft: The Chens had insurance and received an $80,000 insurance settlement.
What is the allowable casualty loss deduction for the Chens in 2014?

Question

Quizplus · Accepted Answer

The casualty loss is calculated as the lesser of the decrease in fair market value or the adjusted basis, minus insurance reimbursement, minus $100 per event, and then reduced by 10% of AGI. Assuming the loss was $130,000 (before insurance), the calculation is: $130,000 - $80,000 (insurance) - $100 = $49,900. Then, $49,900 - $11,000 (10% of AGI) = $38,900. However, the correct choice seems to be based on a different calculation or assumption, leading to $3,900.

In 2014,the Chens' Pleasure Boat Was Severely Damaged by a Hurricane