Jim had a car accident in 2010 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 80% of the value of the car at the time of the accident.If Jim's AGI for the year is $50,000,determine his deductible loss on the car.

Question

Quizplus · Accepted Answer

The deductible loss is the lesser of the adjusted basis or the fair market value of the car, reduced by the insurance recovery. In this case, the deductible loss is the lesser of $40,000 or $30,000 - $24,000 (80% of $30,000), which is $6,000.

Jim Had a Car Accident in 2010 in Which His