In early 2018, Conrad Corporation discovered their bookkeeper had embezzled $30,000 over the last three years at a rate of approximately $10,000 per year. Conrad also suffered uninsured hurricane damage of $40,000 late in 2018 in a presidentially declared disaster area. If Conrad wants to deduct its losses at the earliest time possible, what are the amounts (before any limitations) and year(s) of its loss deduction?

Question

Quizplus · Accepted Answer

The embezzlement loss of $30,000 can only be deducted in the year it was discovered, which is early 2018. The hurricane damage loss of $40,000 can be deducted in the year it occurred, which is 2018. Therefore, the total amount of loss deduction is $70,000, and the deduction should be reported as $40,000 for 2017 and $30,000 for 2018.

In Early 2018, Conrad Corporation Discovered Their Bookkeeper Had Embezzled