Jim had a car accident in 2014 in which his car was completely destroyed.At the time of the accident,the car had a fair market value of $30,000 and an adjusted basis of $40,000.Jim used the car 100% of the time for business use.Jim received an insurance recovery of 70% of the value of the car at the time of the accident.If Jim's AGI for the year is $60,000,determine his deductible loss on the car.

Question

Quizplus · Accepted Answer

The car is used for business use and hence,the amount of the loss is $40,000 (adjusted basis)reduced by the insurance recovery ($21,000).The $19,000 loss is not subject to the $100 floor per event and the 10%-of-AGI limitation.So the loss is $19,000.

Jim Had a Car Accident in 2014 in Which His