Jim was in an auto accident this year. Jim paid $2,450 to repair his personal-use car after the accident and his insurance only reimbursed him $400. Jim bought his car several years ago for $1,500. What is the amount of casualty loss from this accident before Jim applies any casualty loss floor limitations?

Question

Quizplus · Accepted Answer

The loss is the lesser of the adjusted basis of the asset ($1,500) or the decline in value (here the amount of repairs - $2,450). Before the loss is compared to the per casualty floor limit, the amount of the loss ($1,500) must be reduced by insurance reimbursements ($400).

Jim Was in an Auto Accident This Year