Question

Linda installed a special pool for the hydrotherapeutic treatment of severe arthritis, as prescribed by her doctor. The cost of installing the pool was $22,400, and her insurance company paid $5,600 toward its cost. The pool increased the value of Linda's house by $7,840, and it has a useful life of 10 years. How much of a deduction (before any AGI limitations) is Linda entitled to in the year of installation of the pool?

Answer 1

Answer:

Linda is entitled to deduction (before any AGI limitations) of $896 in one year of installation of the pool.

Explanation:

Following is explained calculation for deduction (before any AGI limitations) that is Linda entitled to in the year of installation of the pool.

Given that:

Cost of Installing the pool = $22,400

Paid by insurance company = $5,600

So by deducting the price paid by insurance company from total cost the balance becomes:

Balance = $22,400 - $5,600 = $ 16,800

As the pool increased the value of house by $7,840 so we will deduct this amount from balance:

Balance = $ 16,800 - $7,840 = $8,960

As the useful life given for pool is 10 years so we will divide the balance with 10 to obtain the deduction amount for 1 year:

Deduction amount for one year = $8,960/10 = $8,96

Hence $8,96 will be deducted in one year installation.

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