Mr. and Mrs. King had only one casualty loss this year when a tornado (a federally declared disaster) damaged their home, decreasing its value by $70,000. The couple received a $48,000 reimbursement from their insurance company. Compute the Kings' itemized deduction for casualty losses if their AGI was $98,200.

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The deductible casualty loss is calculated by taking the decrease in property value due to the casualty ($70,000), subtracting any insurance reimbursement ($48,000), and then further reducing that amount by $100 and 10% of the taxpayer's AGI. Thus, $70,000 - $48,000 = $22,000 - $100 = $21,900 - (10% of $98,200, which is $9,820) = $12,080.

Mr and Mrs