Juanita,who is single,lives in an area that suffered a major hurricane in 2019 which was declared a federal disaster.Her car sustained $6,200 in damages.Juanita does not expect to recover any of the loss from her insurance company.Juanita's 2019 AGI is $31,000,and she deducts a $3,000 loss after applying limitations on her 2019 tax return.Her other itemized deductions in 2019 exceed $12,200.In 2020,Juanita's insurance company reimburses her $2,800.Juanita's 2020 AGI is $28,000.As a result,Juanita must
A)amend 2019 to show a $200 loss.
B)do nothing and simply keep the $2,800.
C)do nothing to the 2019 return but report $2,800 of income on her 2020 return.
D)amend the 2019 return to show $0 loss and file her 2020 return to show a $200 loss.

Question

Quizplus · Accepted Answer

Since Juanita did not expect to recover any of the loss from her insurance company in 2019, she properly deducted the $3,000 loss on her 2019 tax return. However, when she receives $2,800 in reimbursement in 2020, she will need to report this as income on her 2020 tax return. She does not need to amend her 2019 tax return or change the amount of the loss deduction.

Juanita,who Is Single,lives in an Area That Suffered a Major