Nicole has a weekend home on Pecan Island that she purchased in 2005 for $250,000.Recently,the home was appraised at $260,000.After the appraisal,a hurricane hit Pecan Island,severely damaging Nicole's home.An appraisal placed the value of the home at $140,000 after the hurricane.Because of its prohibitive cost,Nicole had no hurricane insurance.Before any reductions or limitations,Nicole's casualty loss amount is

Question

Quizplus · Accepted Answer

Nicole's casualty loss amount is calculated as the lesser of the decrease in fair market value of the property or the adjusted basis of the property. In this case, the decrease in fair market value after the hurricane is $260,000 - $140,000 = $120,000, which is less than her adjusted basis of $250,000. Therefore, her casualty loss is $120,000.

Nicole Has a Weekend Home on Pecan Island That She