Answer:
Explanation:
cost of building = $800,000
business = $800,000 x 40% = $320,000 - $100,000 (depreciation) = $220,000
personal use = $800,000 x 60% = $480,000
adjusted basis:
business = $220,000
personal use = $480,000
decline in FMV:
business = $700,000 x 40% = $280,000
personal use = $700,000 x 60% = $420,000
loss on building (lesser of basis of decline in FMV):
business = $220,000
personal use = $420,000
recovery from insurance company $600,000
business = $600,000 x 40% = $240,000
personal use = $600,000 x 60% = $360,000
gain/loss on building:
business = $175,000 - $220,000 = -$45,000 (loss)
personal use = $360,000 - $420,000 = -$60,000 (loss)
gain/loss on contents:
business = $240,000 - $220,000 = $20,000 (loss)
personal use = $65,000 - $50,000 = $15,000 (gain)
AGI before the fire = $100,000
+ business gain on building $20,000
- business loss on contents ($45,000)
- personal loss on building up to personal gain ($15,000)
<u>+ personal gain on contents $15,000</u>
heather's AGI after the fire = $75,000
