Gomez, a self-employed consultant, is involved in a traffic accident with his business-use automobile. The car is totally destroyed and Gomez's insurance policy reimburses him $8,000 for the fair market value of the car immediately before the accident. His basis in the car is $11,000. What is the amount of Gomez's casualty loss deduction?

Question

Quizplus · Accepted Answer

Gomez's deductible casualty loss is his basis minus any insurance reimbursement. Therefore, his casualty loss deduction is $11,000 - $8,000 = $3,000. Option A is incorrect because he has a casualty loss to deduct. Option B is incorrect because his casualty loss exceeds $2,000. Option D is incorrect because his deduction is not limited to $8,000, but instead is based on his basis minus any reimbursement. Option E is incorrect because his basis exceeds the reimbursement, resulting in a casualty loss deduction.

Gomez, a Self-Employed Consultant, Is Involved in a Traffic Accident