Alma is in the business of dairy farming.During the year,one of her barns was completely destroyed by fire.The adjusted basis of the barn was $90,000.The fair market value of the barn before the fire was $75,000.The barn was insured for 95% of its fair market value,and Alma recovered this amount under the insurance policy.Alma has adjusted gross income for the year of $40,000 (before considering the casualty).Determine the amount of loss she can deduct on her tax return for the current year.

Question

Quizplus · Accepted Answer

Amount of loss (adjusted basis for business property that is completely destroyed)$90,000
Less: Insurance proceeds received ($75,000 × 95%)(71,250)
Business loss $18,750
A business casualty loss is classified as an ordinary loss.

Alma Is in the Business of Dairy Farming