Juanita,who is single,is in an automobile accident in 2016 and her car sustains $6,200 in damages.Juanita does not expect to recover any of the loss from her insurance company.Juanita's 2016 AGI is $31,000,and she deducts a $3,000 loss on her 2016 tax return.Her other itemized deductions in 2016 exceed $12,000.In 2017,Juanita's insurance company reimburses her $2,800.Juanita's 2017 AGI is $28,000.As a result,Juanita must
A)amend 2016 to show a $200 loss.
B)do nothing and simply keep the $2,800.
C)do nothing to the 2016 return but report $2,800 of income on her 2017 return.
D)amend the 2016 return to show $0 loss and file her 2017 return to show a $200 loss.

Question

Quizplus · Accepted Answer

Juanita deducted the $3,000 loss on her 2016 tax return, when she did not expect to receive any reimbursement. Therefore, she must report the $2,800 reimbursement as income on her 2017 tax return. She does not need to amend her 2016 tax return because the loss deduction was appropriate at the time she filed. Also, since her AGI in 2017 is lower than in 2016, there is no need to amend the 2016 tax return or to file a 2017 return with a $200 loss.

Juanita,who Is Single,is in an Automobile Accident in 2016 and Her