In the current year, Marcus reports the following casualty gains and losses on personal-use property. Assets X and Y are destroyed in the first casualty while Z is destroyed in a second casualty. As a result of these losses and insurance recoveries, Marcus must report

Question

In the current year, Marcus reports the following casualty gains and losses on personal-use property. Assets X and Y are destroyed in the first casualty while Z is destroyed in a second casualty.  As a result of these losses and insurance recoveries, Marcus must report

Quizplus · Accepted Answer

- Asset X is reported as a casualty loss of $20,000 and an insurance recovery of $25,000, resulting in a long-term capital gain of $5,000.
- Asset Y is reported as a casualty loss of $6,500 and an insurance recovery of $5,600, resulting in a short-term capital loss of $900.
- Asset Z is reported as a casualty loss of $1,700 and an insurance recovery of $1,500, resulting in a short-term capital loss of $200.
Therefore, the total net gain/loss is $5,000 - $900 - $200 = $3,900. However, since the losses on assets Y and Z are reported as short-term capital losses, they can only be used to offset short-term capital gains. As there are no short-term capital gains reported, the losses are carried forward to future years. This means that the final reported net gain is $5,000.

In the Current Year, Marcus Reports the Following Casualty Gains