A flood destroyed an antique Persian rug owned by Mr.and Mrs.McConnell.The couple purchased the rug for $13,000 fifteen years ago,but its appraised FMV before the flood was $42,500.Unfortunately,their homeowners' insurance policy does not cover flood damage.Compute the McConnells' casualty loss resulting from the flood,subject to an aggregate 10% AGI floor.

Question

Quizplus · Accepted Answer

The casualty loss is calculated as the lesser of the decrease in FMV ($42,500) or the adjusted basis ($13,000), minus any insurance reimbursement (which is $0 in this case), minus $100 per casualty, and then subject to a 10% AGI floor. Assuming the AGI floor is not specified, the loss is $13,000 - $100 = $12,900.

A Flood Destroyed an Antique Persian Rug Owned by Mr