Jolene owns a dry-cleaning business. During the current year, a rainstorm causes a roof leak that shorts out a dry-cleaning machine. The cost of repairing the machine is $300, none of which is compensated by Jolene’s insurance. The adjusted basis of the machine before it shorted was $14,000.
Identify the tax issue(s) posed by the facts presented. Determine the possible tax consequences of each issue that you identify.