During the year,Megan's personal summer home was almost completely destroyed by a fire started in a work room.She had adjusted gross income of $110,000 in 2014 and related data with respect to the summer home follows: Cost basis: $121,000
Value before casualty: $155,000
Value after casualty: $ 15,000
Megan was partially insured for the loss and in 2014 she received a $100,000 insurance settlement.What is Megan's allowable casualty loss deduction for 2014?
A)$ 9,900.
B)$20,900.
C)$35,900.
D)$55,000.

Question

Quizplus · Accepted Answer

The allowable casualty loss deduction is the lesser of the following:1. The amount of the loss ($155,000 - $15,000 = $140,000)2. The adjusted basis of the property ($121,000)3. The amount of insurance received ($100,000)Therefore, the allowable casualty loss deduction is $100,000.

During the Year,Megan's Personal Summer Home Was Almost Completely Destroyed