Jewels home was completely destroyed by a wildfire in 2019 in an area declared a national disaster.

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Jewel’s home was completely destroyed by a wildfire in 2019 in an area declared a national disaster. The building had an appraised value of $185,000 before the fire. Four years ago Jewel paid $160,000 for the house and the land, with $25,000 of the price allocated to the land.

a. What is Jewel’s loss on the fire, assuming no insurance?

b. What is her deductible loss if her adjusted gross income is $40,000?

c. What is Jewel’s realized gain or loss if she receives $190,000 from the insurance company to rebuild the home?

d. What is her recognized gain if she uses only $130,000 of the insurance proceeds to rebuild a smaller replacement residence on the same land?

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Taxation For Decision Makers 2020

ISBN: 9781119562108

10th Edition

Authors: Shirley Dennis Escoffier, Karen Fortin

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