On the night of January 10, Year 1, a tornado caused serious damage to Jason’s office building and its contents. Just prior to the tornado, the office building had a $250,000 adjusted basis and a fair market value of $300,000; the contents had an adjusted basis of $5,000 and a fair market value of $4,000. The building and the contents immediately after the tornado are appraised at $240,000 and $0, respectively. While the insurance company agreed to pay Jason $30,000 for the damage to the building, its contents were not covered. Jason estimates that is will cost his $10,000 to replace all the contents. Jason’s Year 1 AGI is $120,000. What amount of casualty loss deduction may Jason claim for Year 1 as a result of the tornado?

Multiple Choice

• $15,000 
• $22.900
• $40,000 
• $35,000