In 2016,the Chens' pleasure boat was severely damaged by a hurricane in an area that was declared a federal disaster area.They had AGI of $110,000 in 2016.The following information relates to the craft: Cost Basis $ 95,000
FMV before casualty 145,000
FMV after casualty 25,000
The Chens had insurance and received an $80,000 insurance settlement.What is the allowable casualty loss deduction for the Chens in 2016?

Question

Quizplus · Accepted Answer

The allowable casualty loss deduction is the lesser of the following:1. The adjusted basis of the property ($95,000)2. The decrease in FMV ($145,000 - $25,000 = $120,000)3. The amount of insurance received ($80,000)Therefore, the allowable casualty loss deduction is $80,000.

In 2016,the Chens' Pleasure Boat Was Severely Damaged by a Hurricane