Tim suffered greatly this year. In January a freak storm damaged his sailboat an
ID: 2562877 • Letter: T
Question
Tim suffered greatly this year. In January a freak storm damaged his sailboat and in July Tim's motorcycle was stolen from his vacation home. Tim originally paid $27,250 for the boat, but he was able to repair the damage for $7,600. Tim paid $16,550 for the motorcycle, but it was worth $19,050 before it was stolen. Insurance reimbursed $1,920 for the boat repairs and the cycle was uninsured.
a. Calculate Tim's deductible casualty loss if his AGI is $44,000.
b. Calculate Tim's deductible casualty loss if his AGI is $143,000.
c. How would you answer a. if Tim received an additional $62,050 in interest from municipal bonds this year?
Explanation / Answer
Answer a. Boat Motorcycle Decline in Value 7,600 19,050 Adjusted Basis 27,250 16,550 Lesser of Basis or Value 7,600 16,550 Less: Insurance Proceeds (1,920) - Uninsured Loss 5,680 16,550 Pay casualty floor (100) (100) Casualty Loss 5,580 16,450 Total Casualty Loss 22,030 Less: 10% of AGI ($44,000) (4,400) Casualty Loss Deduction 17,630 Answer b. Total Casualty Loss 22,030 Less: 10% of AGI ($143,000) (14,300) Casualty Loss Deduction 7,730 Answer c. Interest on Municipal Bonds is exempt from tax. So, AGI will remain same. Total Casualty Loss 22,030 Less: 10% of AGI ($44,000) (4,400) Casualty Loss Deduction 17,630