Juanita,who is single,is in an automobile accident in 2014 and her car sustains $6,200 in damages.Because both drivers received tickets in the accident,Juanita does not expect to recover any of the loss from her insurance company.Juanita's 2014 AGI is $31,000,and she deducts a $3,000 loss on her 2014 tax return.Her other itemized deductions in 2014 exceed $12,000.In 2015,Juanita's insurance company reimburses her $2,800.Juanita's 2015 AGI is $28,000.As a result,Juanita must
A)amend 2014 to show a $200 loss.
B)do nothing and simply keep the $2,800.
C)do nothing to the 2014 return but report $2,800 of income on her 2015 return.
D)amend the 2014 return to show $0 loss and file her 2015 return to show a $200 loss.

Question

Quizplus · Accepted Answer

Juanita originally deducted a $3,000 loss in 2014 for the damages to her car. However, when she received the reimbursement from her insurance company in 2015, she must offset that reimbursement against the previously deducted loss. Since she only received $2,800, she must report this as income on her 2015 tax return. She does not need to amend her 2014 return as she had already deducted the full amount of the loss on that year's tax return, and her other itemized deductions exceeded the standard deduction.

Juanita,who Is Single,is in an Automobile Accident in 2014 and Her