Question

Kevin's boat was wrecked by hurricane Harvey (a federally declared natural disaster). Damage to the boat was estimated at $30,000. The original cost was $25,000. The boat was partially insured, and Kevin received an insurance reimbursement of $15,000. Kevin's adjusted gross income is $50,000, and he had no other losses during the year. What amount can Keith deduct on his tax return for this year

Answer 1

A) $4,900

Step-by-step explanation:

Options are: "A) $4,900 B) $5,000 C) $9,900 D) $14,900"

Particulars Amount

Original cost $25,000

Damage $30,000

Lower of the two is $25,000

Less: Insurance reimbursement $15,000

Actual loss $10,000

Less: Deduction $100

Less: 10% of AGI (10% of 50,000) $5,000

Final Deduction $4,900

Note: Flat $100 is deducted from this amount and also 10% of AGI, i.e 10% of $50,000 is deducted to finally arrive at the deduction.