Question

Linda installed a special pool for the hydrotherapeutic treatment of severe arthritis, as prescribed by her doctor. The cost of installing the pool was $20,000, and her insurance company paid $5,000 toward its cost. The pool increased the value of Linda's house by $7,000, and it has a useful life of 10 years. How much of a deduction (before any AGI limitations) is Linda entitled to in the year of installation of the pool? $

Answer 1

Linda is entitled to a deduction of $14,300 in the year of installation of the pool

Step-by-step explanation:

Step 1: Determine total installation cost

total installation cost=installation-insurance

where;

installation cost=$20,000

insurance cost=$5,000

replacing;

total installation cost=20,000-5,000=15,000

total installation cost=$15,000

Step 2: Determine annual increase in house value

annual increase in house value=increase in house value/useful life

where;

increase in house value=$7,000

useful life=10 years

replacing;

annual increase in house value=7,000/10=$700

Step 3: Determine total deductions

total deductions=installation cost-annual increase in house value

where;

installation cost=$15,000

annual increase in house value=$700

replacing;

total deductions=15,000-700=$14,300

Linda is entitled to a deduction of $14,300 in the year of installation of the pool