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 and the car attached itself to a tree. Before the accident, the car was worth $8,000 but, after the accident, only $1,000. She received $1,000 from her insurance company for the auto accident. Disregarding the casualty, Sleepy has adjusted gross income of $30,000.

a. Assume that Sleepy has no other casualties during the tax year:

i. What is the amount of Sleepys personal casualty gain/loss on the car for the year?

ii. What is the amount of Sleepys deduction for the tax year?

b. Sleepys car accident occurred while she was taking a collectible vase to have it appraised. She purchased the vase two years earlier for $10,000 and received $20,000 from the insurance company because the vase was totally destroyed in the accident.

i. What is the amount of Sleepys personal casualty gain/loss on the vase?

ii. How will the two casualties be reported on Sleepys tax return?

iii. What would be the outcome if Sleepy received $12,000 for the destroyed vase and $1,000 for the car?