Question

Acme Corp.'s delivery truck (adjusted basis $40.000, FMV $27.000) was completely destroyed in a freeway cident. Insurance paid $10,000. Compute the casualty loss deduction and indicate where the loss is deducted FOR or FROM AGI). 7. Xerox Corp.'s small plane (adjusted basis $32,000; FMV before casualty 552,000) was damaged in a crash Afterwards, the plane was appraised at $24,000. Insurance paid $12,000. Compute the casualty loss deduction and indicate where the loss is deducted (FOR or FROM AGI).

Answer 1

6.  This is a TOTAL BUSINESS casualty. Amount of loss is $40,000 (adjusted basis)

Deduction is FOR AGI. Amount of deduction is:

Casualty Amount $40,000

Less: Insurance ( 10,000)

Deduction $30,000

7.  This is a PARTIAL BUSINESS casualty.Amount of loss is $28,000 (smaller of adj. basis $32,000 or decline in FMV---FMV before $52,000 less FMV after $24,000 = $28,000)

  Deduction is FOR AGI.  Amount of deduction is:

Casualty Amount $28,000

Less: Insurance ( 12,000)

Deduction $16,000