LO.2 A sculpture that Korliss Kane held for investment was destroyed in a flood. The sculpture was insured, and Korliss had a $60,000 gain from this casualty. He also had a $17,000 loss from an uninsured antique vase that was destroyed by the flood. The vase was also held for investment. Korliss had no other property transactions during the year and has no nonrecaptured § 1231 losses from prior years. Both the sculpture and the vase had been held more than one year when the flood occurred (i.e., both are long-term nonpersonal use capital assets). Compute Korliss’s net gain or loss, and identify how it would be treated. Also write a letter to Korliss, explaining the nature of the gain or loss. Korliss’s address is 2367 Meridian Road, Hannibal, MO 63401.
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Chapter 17 Solutions
Individual Income Taxes
- Virginia has business property that is stolen and partially destroyed by the time it was recovered. She receives an insurance reimbursement of $6,000 on property that had a $14,000 basis and a decrease in market value of $10,000 due to damage caused by the theft. What is the amount of Virginia's casualty loss? $14,000 $8,000 $10,000 $4,000 None of the abovearrow_forwardAn office machine used by Josie in her accounting business was completely destroyed by fire. The adjusted basis of the machine was $9,250 (original basis of $13,875 less accumulated depreciation of $4,625). The machine was not insured. Calculate the amount and nature of Josie's gain or loss as a result of this casualty. (Assume this is the taxpayer's only casualty gain or loss.) Amount of gain or loss: $arrow_forward2. Jordan has some damages on his business property when tornado hit his area. Her truck was used 100 percent for business use in her sole proprietorship. The truck had originally cost $35,000 and she had taken $5,000 depreciation. At the time of the disaster, it was worth $25,000. After the accident, it was $0. She received insurance company's payment of $20,000. How much is her deducible casualty loss? What is her deductible casualty loss if the truck's residual value was $5,000? 3. Fill in the blanks on the following like-kind exchanges Boot FMV of Adjusted basis of given new asset old asset a. b. 17000 15000 4000 C. d. 16000 e. 7000 0 0 6000 0 0 14000 29000 8000 28000 12000 Boot Realized received Gain/(loss) 0 0 500 0 4000 Recognized Postponed gain/loss Gain/loss New basis of received propertyarrow_forward
- Chad owned an office building that was destroyed in a tornado. The area was declared a Federal disaster area. The adjusted basis of the building at the time was 890,000. After the deductible, Chad received an insurance check for 850,000. He used the 850,000 to purchase a new building that same year. How much is Chads recognized loss, and what is his basis in the new building?arrow_forwardOn July 24 of the current year, Sam Smith was involved in an accident with his business use automobile. Sam had purchased the car for 30,000. The automobile had a fair market value of 20,000 before the accident and 8,000 immediately after the accident. Sam has taken 20,000 of depreciation on the car. The car is insured for the fair market value of any loss. Because of Sams history, he is afraid that if he submits a claim, his policy will be canceled. Therefore, he is considering not filing a claim. Sam believes that the tax loss deduction will help mitigate the loss of the insurance reimbursement. Sams current marginal tax rate is 35%. Write a letter to Sam that contains your advice with respect to the tax and cash flow consequences of filing versus not filing a claim for the insurance reimbursement for the damage to his car. Also prepare a memo for the tax files. Sams address is 450 Colonels Way, Warrensburg, MO 64093.arrow_forwardRebecca Botson purchased a personal residence for $286,000. It had a fair market value of $300,000 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 federal casualty loss she can claim if her adjusted gross income is $120,000?arrow_forward
- LO.4 Belinda was involved in a boating accident in 2020. Her speedboat, which was used only for personal use and had a fair market value of $28,000 and an adjusted basis of $14,000, was completely destroyed. She received $10,000 from her insurance company. Her AGI for 2020 is $37,000. What is Belinda’s casualty loss deduction (after any limitations)?arrow_forward49. Stanley sold a building used in his business and held for 5 years for a $50,000 loss. It is the only asset he sold. After netting, the loss will be an ordinary loss. a. False b. Truearrow_forwardAlicia's automobile destroyed in a tornado on 5/4/2021. This did not occur in a Federally declared disaster area. Her car was used 70% for business and 30% for personal use. The car had originally cost $40,000. At the time of the accident, the car was worth $20,000 and Alicia had taken $8,000 of depreciation. The car was totally destroyed and Alicia had let her car insurance expire. If her AGI is $50,000 (before considering the loss), determine her AGI and itemized deduction for the casualty loss. $34,000;$-0- $30,000;$-0- $26,000;$5,700 None of these $34,000;$4,500arrow_forward
- Yancy's personal residence is condemned as part of an urban renewal project. His adjusted basis for the residence is $572,600. He receives condemnation proceeds of $543,970 and invests the proceeds in stocks and bonds. If an amount is zero, enter "0". a. Calculate Yancy's realized and recognized gain or loss. Yancy's realized loss is $________________, and Yancy's recognized loss is $_________________. b. If the condemnation proceeds are $598,367, what are Yancy's realized and recognized gain or loss? Yancy's realized gain is $_______________, and Yancy's recognized gain is $_______________. c. Assume the house is rental property. Yancy's adjusted basis is $572,600 and he receives condemnation proceeds of $543,970 and invests the proceeds in stock. What are Yancy's realized and recognized gain or loss? Yancy's realized loss is $______________, and Yancy's recognized loss is $________________arrow_forwardRoger, an individual, owns a proprietorship called Green Thing. In the current year, Roger has the following items: Business income $200,000 Business expense $150,000 Loss on a completely destroyed business machine. The machine had an adjusted basis of $25,000 and a fair market value of $20,000 before destroyed. The machine was not insured. Loss on a business truck. The truck had an adjusted basis of $8,000. The repairs to fix the truck cost $10,000. He did not claim the loss from insurance company. Determine Roger's net business income.∙ A. $47,000 B. $30,000 C. $22,000 D. $17,000 E. $15,000arrow_forwardJack Jones has the following casualty gains and losses in 2016: (a) gain on the destruction by fire of hardware store--$10,000; (b) loss on destruction by hurricane of residential rental property--$15,000; and (c) loss on theft of diamonds purchased for investment--$5,000. All of the assets were held for more than one year. Sam should report: 1) $10,000 net Section 1231 loss. 2) $10,000 ordinary gain and $20,000 itemized deduction. 3) $10,000 ordinary loss. 4) $15,000 ordinary loss. 5) $5,000 ordinary loss and $5,000 itemized deduction.arrow_forward
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT