Question

Kenneth Kruise purchased a personal residence for $266,000. It had a fair market value of $280,000 in the current year when it was damaged by a flood that resulted in the entire area being declared a federal disaster areA. The fair market value after the flood was $240,000 and insurance proceeds totaled $15,000. What is the net amount of casualty loss he can claim if his adjusted gross income is $120,000

Answer 1

$12,900

Step-by-step explanation:

The computation of net amount is shown below:-

Before fire the fair market value = $280,000

Less: After fire the fair market value = $240,000

Less: Insurance Proceeds = $15,000

Less: Reduction = 100

Less: 10% of adjusted gross income = $12,000

Net Amount = $12,900

Note :- The basis is higher than the reduction in fair value, so the cost will be reduced by the insurance proceeds, $100 and 10% of gross income cause of non business loss.