Final answer:
Daniel can deduct the loss from the tornado on his taxes for either the year the event occurred, 2015, or the preceding year, 2014, due to the President declaring the area a disaster area.
Step-by-step explanation:
D) either 2014 or 2015. When a taxpayer experiences a loss due to a disaster in an area declared as a disaster area by the President of the United States, the tax code allows a certain level of flexibility. In the case of Daniel's cabin being destroyed by a tornado, he has two options. He can either claim the loss on the tax return of the year in which the loss occurred, which is 2015, or he can amend the previous year's tax return and claim the loss in 2014. This can provide some immediate tax relief if amending the previous year's return.
Let's consider the context provided by Figure 20.1 concerning different plans to prepare for a potential tornado. Plan A, which entails doing nothing in preparation, would likely result in the highest physical and emotional cost should the tornado hit Daniel's house, but no cost if the tornado misses. Plan B, where he boards up windows and utilizes a tornado shelter, would involve preparation costs regardless of the outcome, but would likely reduce the physical and emotional damage if the tornado did hit. After the disaster, he would have to weigh these costs against the feeling of safety during the incident and potential reduction in damage.