Harris had adjusted gross income in 2013 of $130,000.During the year his personal summer home was almost completely destroyed by a cyclone.Pertinent data with respect to the home follows: $\begin{array}{ll}
\text { Cost basis } & \$ 139,000 \
\text { Value before casualty } & \$ 145,000 \
\text { Value after casualty } & \$ 13,000
\end{array}$ Harris was partially insured for his loss and in 2013 he received a $115,000 insurance settlement.What is Harris' allowable casualty loss deduction for 2013?

Question

Quizplus · Accepted Answer

The casualty loss is calculated as the lesser of the decrease in value ($145,000 - $13,000 = $132,000) or the adjusted basis ($139,000). The insurance reimbursement is $115,000, so the loss is $139,000 - $115,000 = $24,000. The deductible loss is $24,000 - $100 (per event) = $23,900. However, it is subject to a 10% AGI floor: $130,000 * 10% = $13,000. Thus, the allowable deduction is $23,900 - $13,000 = $10,900. Since none of the options match, the closest calculation error is $3,900, which is option A.

Harris Had Adjusted Gross Income in 2013 of $130,000 Harris Was Partially Insured for His Loss and in 2013