Question

In the current year, Wilson Enterprises, a calendar year taxpayer, suffers a casualty loss of $90,000. The casualty was attributable to a Federally declared disaster. How much of the casualty loss will be deductible by Wilson under the following circumstances?
a. Wilson is an individual proprietor and has AGI of $225,000. The casualty loss was a personal loss, and the insurance recovered was $50,000.b. Wilson is a corporation, and the insurance recovered was $50,000.

Answer 1

Answer:

A. $17,400

B. $40,000

Explanation:

A. Calculation to determine How much of the casualty loss will be deductible by Wilson

Using this formula

Itemized deduction = Casualty loss - Insurance recovery -$100 - 10% of AGI (ADJUSTER GROSS INCOME)

Let plug in the formula

Itemized deduction= $90,000 - $50,000 - $100- $225000*10%

Itemized deduction=$90,000 - $50,000 - $100-$22,500

Itemized deduction=$ 17,400

Therefore the amount of casualty loss that will be deductible by Wilson is $17,400

b. Calculation to determine How much of the casualty loss will be deductible by Wilson if Wilson is a corporation, and the insurance recovered was $50,000

Using this formula

Deduction if it is a C Corp = Casualty loss - Insurance recovery

Let plug in the formula

Deduction if it is a C Corp=$90,000 -$50,000

Deduction if it is a C Corp=$40,000

Therefore the amount of the casualty loss that will be deductible by Wilson if Wilson is a corporation, and the insurance recovered was $50,000 is $40,000