Question

Casualty 10-16 ness Casualty Loss: Business and Investment Property. H is a private detective. While Jouthing this year, his car was stolen. The car, which was used entirely for busi- ss was worth $7,000 and had an adjusted basis of $12,000. H received no insur- ance reimbursement for his car. Also this year, his office was the victim of arson. The fire destroyed only a painting that had a basis of $1,500 and was worth $3,000. u received a reimbursement of $800 from his insurance company for the painting. u suffered yet another misfortune this year as his rental property was damaged by flood, the first in the area in 70 years. Before the casualty, the property—which had greatly appreciated in value—was worth $90,000 and afterward only $40,000. The rental property had an adjusted basis of $30,000. He received $20,000 from the insurance company, the maximum amount for which homes in a flood plain could be insured. Compute H's casualty loss deduction assuming his AGI is $30,000. Can a casualty loss create a net operating loss? 010 000 us stolen

Answer 1

PVan Deich here are 3 type of lossess we will o understand There are One by one & for * General Rule (A) Asset used for Business purpose (fully destroyed) Adjusted Basis - Insurance claim Received would be treated a casuality lossess Asser used for business purporse (Partially destroyed • Adjusted Basis For After Disaster - fm v Before Disaster whever is lower len Insurance claim Amount * For calculating Casuality loss. It also cover Rental property 1. There is no personal Asser so we are not discussing Rule for personal Asset one we will discuss one by one A Car - Completly used for Business and it is fully destroyed so Casuality loss & Adjusted Basis - Insurance claim >) 12000 - 0 - $12000 B) Fire in office destroy painting batally destroyed Also Recolved Io surance claim - Adjosted value Basis $1500 - Insurance $ 800 S700 would be o suality log c) Rental Property partially destroyed Received Insuranc Adjusred Basis 30,000 $ muafter flood 40,ooo - FMV Befor flood 90.000 -) 50.000 whever is lower - Insurana claim fully 30,000 - 20000 Casuality loss » 1oooot ON

so total Casuality coss is A + Btc 12000+ too +10oo0 = $22700 Casucality loss treated as operating lossens & should be deducted from AbI and not for Aa I »