Mr.and Mrs.Blake suffered two casualty losses this year.Mr.Blake's wallet containing $1,300 cash was stolen,and their uninsured sailboat (basis $67,000; FMV $50,000)was destroyed by a tsunami (federally declared disaster).Compute the Blakes' itemized deduction for casualty losses if their AGI was $112,200.

Question

Quizplus · Accepted Answer

The deductible casualty loss is calculated as the lesser of the adjusted basis or the decrease in FMV, minus insurance, minus $100 per event, and then reduced by 10% of AGI. The sailboat loss is $50,000 (FMV), minus $100, minus 10% of AGI ($11,220), resulting in a deductible loss of $38,680. The stolen cash is not deductible.

MrAnd MrsBlake Suffered Two Casualty Losses This Year