Question
1. At a cost of $10,000, Sleepy purchased a car three years ago for personal use. In the current year, she dozed off one night
1. At a cost of $10,000, Sleepy purchased a car three years ago for personal use. In the current year, she dozed off one night while driving. Before the accident, the car was work $8,000 but after only $1,000. At the time of the accident Sleepy was taking a vase, a decorative ornament in her home, to a dealer to have it appraised. it had been purchased two years earlier for $10,000, and it was totally destroyed in the accident. Sleepy recovered $1,000 in insurance for the care and $20,000 for the vase. Disregarding the above transactions Sleepy has an adjusted gross income of $30,000. (a) What is the amount of Sleepy's personal casualty loss on the car for the year?(b) What is the amount of Sleepy's personal casualty gain on the vase for the year?(c) What is the character of those gains and losses?(d) To what extent are Sleepy's losses deductible?(e) Is the deduction an itemized deduction? (f) what results in (a)-(e), above, if Sleepy recovers only $12,000 in insurance for the vase? (g) What difference in the results above is Sleepy avoids the insurance company and does not collect the $1,000 of auto insurance because she fears the company will cancel her policy? (see internal revenue code section 165(h)(4)(E).
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