Question

Albert purchased a tract of land for $140,000 in 2017 when he heard that a new highway was going to be constructed through the property and that the land would soon be worth $200,000. Highway engineers surveyed the property and indicated that he would probably get $180,000. The highway project was abandoned in 2020 and the value of the land fell to $100,000. What is the amount of loss Albert can claim in 2020

Answer 1

Answer:

The amount of loss that Albert can claim in 2020 is limited to:

= $3,000.

Explanation:

a) Data and Calculations:

2017 Purchase cost of the tract of land = $140,000

Speculated price of the land = $200,000

Highway engineers-determined value = $180,000

2020 Value of the land after the project was abandoned = $100,000

The total amount of capital loss = $40,000 ($140,000 - $100,000)

The total amount of capital loss that Albert can claim in any tax year is limited to $3,000.  The remaining amount of the capitalloss that he incurred in 2020 will be carried forward.