Mr. Rex had his car stolen this year. The car had $35,600 basis and a $22,000 FMV. Rex received a $16,500 reimbursement from his insurance company. Compute Rex's casualty loss resulting from the theft.

Question

Quizplus · Accepted Answer

The casualty loss is calculated as the lesser of the adjusted basis ($35,600) or the decrease in FMV ($22,000), minus the insurance reimbursement ($16,500). Thus, $22,000 - $16,500 = $5,500. However, the correct choice is $5,400, which accounts for a $100 deductible typically applied to casualty losses.

Mr Rex Had His Car Stolen This Year