Tim suffered greatly this year. In January a freak storm damaged his sailboat an
ID: 2579587 • 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 $31,050 for the boat, but he was able to repair the damage for $9,050. Tim paid $18,300 for the motorcycle, but it was worth $20,050 before it was stolen. Insurance reimbursed $1,300 for the boat repairs and the cycle was uninsured.
a. Calculate Tim's deductible casualty loss if his AGI is $46,500.
b. Calculate Tim's deductible casualty loss if his AGI is $145,500.
c. How would you answer a. if Tim received an additional $69,925 in interest from municipal bonds this year?
Explanation / Answer
Answer a. Boat Motorcycle Decline in Value 9,050 20,050 Adjusted Basis 31,050 18,300 Lesser of Basis or Value 9,050 18,300 Less: Insurance Proceeds (1,300) - Uninsured Loss 7,750 18,300 Pay casualty floor (100) (100) Casualty Loss 7,650 18,200 Total Casualty Loss 25,850 Less: 10% of AGI ($46,500) (4,650) Casualty Loss Deduction 21,200 Answer b. Total Casualty Loss 25,850 Less: 10% of AGI ($145,500) (14,550) Casualty Loss Deduction 11,300 Answer c. Interest on Municipal Bonds is exempt from tax. So, AGI will remain same. Total Casualty Loss 25,850 Less: 10% of AGI ($46,500) (4,650) Casualty Loss Deduction 21,200