The Kaplans,who live in Boise,Idaho,had adjusted gross income of $140,000 in 2017.During the year,their principal residence was severely damaged by a house fire.The pertinent financial information is as follows: $\begin{array}{lr}
\text { Cost basis }= & \$ 134,000 \
\text { Value before casualty }= & \$ 156,000 \
\text { Value after casualty }= & \$ 20,000
\end{array}$ The Kaplans had some insurance and in 2017 reached a settlement with the insurance company for $110,000 insurance settlement.What is their allowable casualty loss deduction for 2017?
A)$9,900.
B)$23,900.
C)$36,000.
D)None of these.

Question

Quizplus · Accepted Answer

The casualty loss is calculated as the lesser of the decrease in value ($156,000 - $20,000 = $136,000) or the adjusted basis ($134,000). The insurance reimbursement is $110,000, so the loss is $134,000 - $110,000 = $24,000. After the $100 reduction and 10% of AGI ($14,000), the deductible loss is $24,000 - $100 - $14,000 = $9,900.

The Kaplans,who Live in Boise,Idaho,had Adjusted Gross Income of $140,000