Question

Maria's car was damaged during a celebration in Detroit after a Super Bowl victory. She paid $17,000 for the car, which is her adjusted basis. The damages caused a decrease in the vehicle's fair market value of $5,500. Her new iPad was also stolen from the car when it was damaged. The fair market value of the iPad was $500, which was her adjusted basis. How does Maria report her losses after applying the $100 minimum floor but before consideration of the AGI limitation?

A. Schedule A loss of $5,400 for the car and the iPad.
B. Schedule D loss of $5,400 for the car and a Schedule A loss of $500 for the iPad.
C. Schedule A loss of $5,900 for the car and the iPad.
D. Schedule D loss of $5,900 for the car and the iPad.

Answer 1

Maria would report a Schedule A loss of $11,500 for the car and no loss for the iPad.

Step-by-step explanation:

Maria would report her losses by adding the decrease in fair market value of the car and the stolen iPad to her adjusted basis, and subtracting the result from the original purchase price of the car and iPad.

The loss for the car would be $17,000 - $5,500 = $11,500, and the loss for the iPad would be $500 - $500 = $0.

Since the iPad loss is less than the $100 minimum floor, it is not deductible. Therefore, Maria would report a Schedule A loss of $11,500 for the car and no loss for the iPad.