In 2013,Sarah (who files as single)had silverware worth $10,000 (basis $6,000)stolen from her home.Sarah's insurance company told her that her policy did not cover the theft.Sarah's other itemized deductions last year were $2,000.She had AGI of $30,000 last year.In August of 2014,Sarah's insurance company decided that Sarah's policy did cover the theft of the silverware and they paid Sarah $5,000.Determine the tax treatment of the $5,000 received by Sarah during 2014.

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Quizplus · Accepted Answer

Sarah would have taken a casualty loss of $2,900 ($6,000 - $100 - $3,000)in 2013.Therefore,the total itemized deductions would be $4,900 ($2,900 + $2,000).Because this is less than the 2013 standard deduction of $6,100 for single taxpayers,Sarah would have taken the standard deduction.Hence,none of the $5,000 would be included in gross income under the tax benefit rule.

In 2013,Sarah (Who Files as Single)had Silverware Worth $10,000 (Basis