LO.3, 4, 8 Olaf owns a 500-acre farm in Minnesota. A tornado hit the area and destroyed a farm building and some farm equipment and damaged a barn. Fortunately for Olaf, the tornado occurred after he had harvested his corn crop. Applicable information is as follows:

Item Adjusted Basis FMV before FMV after Insurance Proceeds Building $90,000 $ 70,000 $ –0– $70,000 Equipment 40,000 50,000 –0– 25,000 Barn 90,000 120,000 70,000 25,000 Because of the extensive damage caused by the tornado, the President designated the area as a disaster area.

Olaf, who files a joint return with his wife, Anna, had $174,000 of taxable income last year. Their taxable income for the current year, excluding the loss from the tornado, is

$250,000.

Determine the amount of Olaf and Anna’s loss and the year in which they should take the loss.