Riley operates a plumbing business, and this year the three-year-old van he used in the business was destroyed in a traffic accident. The van was originally purchased for $24,000 and the adjusted basis was $5,300 at the time of the accident. Although the van was worth $6,380 at the time of accident, insurance only paid Riley $1,700 for the loss. What is the amount of Riley's casualty loss deduction?

Question

Quizplus · Accepted Answer

Riley's casualty loss deduction is the lesser of the adjusted basis of the van ($5,300) or the decrease in value of the van as a result of the accident ($6,380 - $1,700 = $4,680). Therefore, his casualty loss deduction is $4,680, which is less than both the original purchase price of the van and the value of the van at the time of the accident.

Riley Operates a Plumbing Business, and This Year the Three-Year-Old