Heather owns a two-story building. The building is used 40% for business use and 60% for personal use. During 2013, a fire caused major damage to the building and its contents. Heather purchased the building for $800,000 and has taken depreciation of $100,000 on the business portion. At the time of the fire, the building had a fair market value of $900,000. Immediately after the fire, the fair market value was $200,000. The insurance recovery on the building was $600,000. The contents of the building were insured for any loss at fair market value. The business assets had an adjusted basis of $220,000 and a fair market value of $175,000. These assets were totally destroyed. The personal use assets had an adjusted basis of $50,000 and a fair market value of $65,000. These assets were also totally destroyed.

If an amount is zero, enter "0".

Determine the business and personal gain or loss in regard to the building and its contents. (If an amount is zero, enter "0.")

	Total		Business Portion		Personal Portion
Cost of building	$800,000		$		$
Less: Depreciation	(100,000)
Adjusted basis	$700,000		$		$
Decline in FMV	$700,000		$		$

	Business Portion		Personal Portion
Loss on building (lesser of basis or decline in FMV)	$		$
Less: Insurance reimbursement
SelectLoss on business portionGain on business portionCorrect 13 of Item 1	$
SelectGain on personal portionLoss on personal portionCorrect 15 of Item 1			$
Loss on business contents	$
Less: Insurance recovery
SelectGain on business contentsLoss on business contentsCorrect 19 of Item 1	$
Loss on personal contents			$
Less: Insurance recovery
SelectLoss on personal contentsGain on personal contentsCorrect 23 of Item 1			$

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Solution

Heather's AGI is $100,000 before considering the effects of the fire. Determine her itemized deduction and AGI after considering the effects of the fire.

Adjusted Gross Income
AGI before effects of accident			$100,000
Business portion of building and contents:
SelectNet gain on building and contentsNet loss on building and contentsCorrect 1 of Item 2
Personal casualty gain
Personal casualty loss to extent of gain
Net personal casualty gain
AGI			$

Itemized Deduction
Balance of personal casualty loss		$
Less: Per event floor
Less: 10%-of-AGI floor
Itemized deduction		$