This summer,Rick's home (which has a basis of $80,000)is damaged by a tornado.An appraisal by a realtor placed the FMV of the home at $120,000 before the tornado and at $85,000 after the tornado.Rick estimates that the insurance company will reimburse him for 60% of the loss.Next year,the insurance company pays Rick $20,000.Rick's current year's AGI is $50,000 and his next year's AGI is $55,000.Rick suffers no other casualty losses in either year.After limitations,Rick may deduct a casualty loss this year of
A)$ 8,900.
B)$ 9,900.
C)$15,000.
D)$35,000.

Question

Quizplus · Accepted Answer

A)Where partial recovery is expected in a subsequent year,the loss may be deducted in the year of the casualty for the estimated unrecovered amount.Lesser of adjusted basis or loss in value [($120,000 - $85,000)- $21,000 anticipated insurance recovery - $100 floor - $5,000 AGI =$8,900].Anticipated recovery is 60% × $35,000 = $21,000.

This Summer,Rick's Home (Which Has a Basis of $80,000)is Damaged