Question

In 2020, Jamie's business-use equipment was completely destroyed in a casualty. The equipment had a fair market value of $100,000 and an adjusted basis of $50,000 at the time of the casualty. Jamie's received insurance proceeds of $40,000. What is the amount of Jamie's casualty loss deduction or her casualty gain in 2020?

Answer 1

In tax accounting, adjusted basis is the net cost of an asset after adjusting for various tax-related items. Casualty loss can be claimed in the year insurance proceeds has been received. Amount of deduction loss claimed is excess value of Adjusted basis over the insurance proceeds received during that particular year.

Computation:-

Jamie's casualty loss deduction on he casualty gain in 2020:-

Adjusted Basis $50,000

Less: Insurance proceeds received ($40,000)

Jamie's casualty loss deduction    = $10,000