Jim had a car accident in 2011 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 personal 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 deductible loss is the adjusted basis of the car minus the insurance recovery. The insurance recovery is 70% of the fair market value of the car, which is $30,000 x 70% = $21,000. The deductible loss is $40,000 - $21,000 = $19,000. However, since the car was used 100% for personal use, the deductible loss is limited to $2,900.

Jim Had a Car Accident in 2011 in Which His