1. Wagner Co. is a cash-basis, calendar-year taxpayer. On August1, 2015, it paid an insurance premium of $4,800 for coverage from August1,2015 to July 31,2016. What is the largest deduction Wagner Co. can take in 2015?

2. Benson company experienced partual destruction of a waregouse from a tornado. The warehouse had a basis of $ 200,000 at the time of the casualty. Its fair market value before the accident was $ 1,000,000 and afterward $600,000. How had this event changed the basis of the warehouse?

a. No effect

b. decease by $200,000

c. Decrease by$400,000

d. Decrease by $100,000 plus insurance proceeds received