Question

Four years ago, an individual taxpayer purchased silver coins at face value for $200. The coins were stolen in the current year where their fair market value is $1,000. The coins were not covered by insurance. Without considering the limit based on AGI, what is the maximum amount of loss that the taxpayer can deduct on the current year's tax return?

Answer 1

The answer is: $100

Step-by-step explanation:

This loss is due to casualty and theft. You have to consider the lesser value between fair market value or book value. In this case the lesser value is $200 (the price at which the coins were purchased). Since the tax code requires a reduction of $100 per event of this kind (casualty and theft losses), then the maximum amount you can deduct from your tax income is $100 ($200 - $100).