Question

In the current year, Wilson Enterprises, a calendar year taxpayer, suffers a casualty loss of $142,500. The casualty was attributable to a Federally declared disaster. How much of the casualty loss will be deductible by Wilson under the following circumstances:

Wilson is an individual proprietor and has AGI of $362,500. The casualty loss was a personal loss, and the insurance recovered was $79,750 before any limitations.
1. Wilson can claim a casualty loss as an itemized deduction of ?
2. Wilson is a corporation, and the insurance recovered was $79,750 before any limitations.

Answer 1

1. As this is a personal loss, the claim for casualty loss is:

= Loss Amount - $100 - 10% of Adjusted Gross Income (AGI)

= (142,500 loss - 79,750 insurance payout) - 100 - (10% * 362,500)

= $26,400

2. As a corporation:

Corporations do not get the $100 and AGI adjustment. Deductible casualty loss is:

= 142,500 loss - 79,750 insurance payout

= $62,750