Question

Belinda was involved in a boating accident in 2019. 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 2019 is $37,000.
Belinda's casualty loss deduction (after any limitations) is :________

Answer 1

Answer: $200

Explanation:

To qualify as a Casualty loss, the event that led to the damage or destruction must have been unexpected such as an accident, hurricane, fire etc.

When calculating for the Casualty loss deduction, we simply deduct the money received from the insurance from the Adjusted basis,

Casualty loss deduction = Adjusted basis - Cash received from the Insurance company

= $14,000 - $10,000

= $4,000

Since it is After any limitations, we also deduct a cost per event floor of $100 and 10% of the AGI

=4,000 - 100 - (37,000*0.1)

= $200

Belinda's casualty loss deduction (after any limitations) is $200.