Problem 7-37 (LO. 3, 4, 8) Olaf lives in the state of Minnesota. In May 2021, a tornado hit the area and damaged his home and automobile. Applicable information is as follows: Item Adjusted Basis FMV before FMV Insurance after Proceeds Home $350,000 $500,000 $100,000 $280,000 Auto 60,000 40,000 10,000 20,000 Because of the extensive damage caused by the tornado, the President designated the area a Federal disaster area. Olaf and his wife, Anna, always file a joint return. Their 2020 tax return shows AGI of $180,000 and taxable income of $145,000. In 2021, their return shows AGI of $300,000 and taxable income (exclusive of the casualty loss deduction) of $225,000. Assume the taxpayers are in the 22% tax bracket in 2020 and the 24% tax bracket in 2021. Determine the amount of Olaf and Anna's loss and the year in which they should take the loss. Item Home Auto Total loss Less: statutory floor amount Loss before statutory % of AGI Amount of Loss Amount of loss on last year's return: Loss Less: statutory % of AGI Total loss Amount of loss on current year's return: Loss Less: statutory % of AGI Total loss Olaf and Anna should include the loss on the return, because the tax savings is greater.