[hmesalguero]

I am so confuse is it 500 or 100 limit? Someone please explain casualty and theft loss

FAR - 76
AUD - 74,84 🙂
REG - 76
BEC - 72, 80

Roger's CPA Review

[SFLocal]

Keep in mind corp and individual will be different. The “floor” of $100 will not apply to corp. They get to take the full deduction of the loss.

For individual with itemized deductions, the $100 floor is a subtraction from the total amount of the casualty loss claimed by the taxpayer.

For example, I have a tree fall on my $5000 car. I am cheap and had only collision insurance, so I eat the cost of the car. Because the incident is sudden and infrequent, I qualify for the casualty loss deduction. I also use itemized deductions. I can deduct $4900 ( $5000 – $100 ). The $100 is for each incident of casualty loss. If you have two cars at $5000 each, that would be $9800 (($5000 – 100) x 2).

Hope that helps.

BEC - Passed!
REG - Passed!
AUD - Passed!
FAR - Passed!

[momto5]

Doesn't your loss have to exceed 10% of your AGI as well to be deductible? In other words, if your AGI is $30,000, your deduction would only be $1900, right? ($5000 – $100 – $3000)

FAR - 92 (4/27/12)
AUD - 96 (7/17/12)
BEC - 92 (8/30/12)
REG - 91 (11/12/12)

[hmesalguero]

So it's not 500?… I am doing Wiley 2011 test bank…do you guys recommend I get the new one

FAR - 76
AUD - 74,84 🙂
REG - 76
BEC - 72, 80

Roger's CPA Review

[Anonymous]

yes it's $100 and you can only deduct in excess of 10% of your AGI so say you have a loss of $5000 and your AGI is $30,000 you get insurance proceeds of $1000 well then your deduction is $5000 loss – $3,000 (10% of 30,000) – $1,000 insurance proceeds – $100 = $900 deduction

[Anonymous]

oh and that's only for Individuals the $100 doesn't apply to corporations

[hmesalguero]

The following information pertains to Cole’s personal residence, which sustained casualty fire damage in 2010:

Adjusted basis

$150,000

Fair market value immediately before the fire

200,000

Fair market value immediately after the fire

180,000

Fire damage repairs paid for by Cole in 2010

10,000

The house was uninsured. Before consideration of any “floor” or other limitation on tax deductibility, the amount of this 2010 casualty loss was?

Please help

FAR - 76
AUD - 74,84 🙂
REG - 76
BEC - 72, 80

Roger's CPA Review

[JD_CPA]

Well, I think this is a trick question.

“Before consideration of any “floor” or other limitation on tax deductibility, the amount of this 2010 casualty loss was?”

The answer in this case would be $10,000

They are just testing you to see if you make the mistake of subtracting the basis from the FMV before or after the fire to determine the loss..

The truth is more info is needed to determine the amount of the loss that can be deducted.

[momto5]

Wouldn't it be $20,000? I thought the loss was the difference between the FMV before and the FMV after (as long as that amount is less than the adjusted basis, which it is in this case) less any insurance proceeds (of which there are none in this example). Being that we are ignoring any floor or limitation on deductibility, it shouldn't matter how much the taxpayer actually paid for repairs, right? The actual loss is still $20,000.

@hmesalguero – can you confirm the correct answer given?

FAR - 92 (4/27/12)
AUD - 96 (7/17/12)
BEC - 92 (8/30/12)
REG - 91 (11/12/12)

[JD_CPA]

@hmesalguero

Sorry, I think I misinterpreted something I read in Becker.

@momto5 is right. The loss should be $20,000.

[Anonymous]

agree with momof5 on the answer – the $10,000 paid by Cole isn't deductible at all regardless.

[Anonymous]

funny I just came across this question while doing Wiley questions for REG here's the explanation they gave …. “This answer is correct. The amount of a personal casualty loss is the lesser of (1) the adjusted basis of the property ($150,000), or (2) the decline in the property’s fair market value resulting from the casualty ($200,000 – $180,000 = $20,000). Thus, Cole’s casualty loss before consideration of the “$100 floor” or the 10% of adjusted gross income limitation is $20,000.”

[Author]

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