When the waters of the Mississippi began to overflow their banks and flood the surrounding area, M was forced to leave her home and head for higher ground. On December 2, she returned to her home to find that it has been vandalized as well as damaged from the flood. After cleaning up, she determined that the following items as been stolen or damaged:

Item / Adjusted Basis / FMV Before / FMV After / Insurance reimbursement

Fur Coat / 6000 / 7000 / 0 / 7000

Computer / 4000 / 3000 / 0 / Uninsured

Couch / 1200 / 800 / See below / 500

Van / 7000 / 5000

The couch had been damaged and M had it reupholstered for $700. The insurance company reimbursed her for the amounts shown on December 27. Under M's insurance policy, the company did not reimburse her for loss on the car until 45 days had passed. M expected to recover $4000 but, after several delays, finally received a check for $2000 on April 25, 2018. While she was waiting for reinbursement for her van, she rented a car at a total cost of $700. Although M received value for the coat, she did not replace it. In addition to the losses shown above, her real estate broker advised that even after her house had not been damaged by the flood, the value had dropped by $20,000 since it was evident that it was located in an area prone to flooding.

a. Compute M's casualty loss deduction, assuming her AGI in 2017 was $18,000 and in 2018, $20,000.

b. Assume the loss occurred on January 2, 2018 and the location was officially designated a disaster area by the President. Explain why the loss could be deducted.

10-16 Personal Casualty. When the waters of the Mississippi began to overflow their banke flood the surrounding area, M was forced to leave her home and head for hiohes and ground. On December 2, she returned to her home to find that it had been vandalized as well as damaged from the flood. After cleaning up, she determined that the fol- lowing items had been stolen or damaged: Insurance Reimbursement Item Adjusted Basis FMV Before FMV After $7,000 Uninsured 500 $0 $7,000 3,000 Fur coat.... Computer Couch. $6,000 4,000 1,200 7,000 800 See below 5,000 The couch had been damaged and M had it reupholstered for $700. The insurance company reimbursed her for the amounts shown on December 27. Under M's insur- ance policy, the company did not reimburse her for loss on the car until 45 days had passed. M expected to recover $4,000 but, after several delays, finally received a check for $2,000 on April 25, 2018. While she was waiting for reimbursement for her van, she rented a car at a total cost of $700. Although M received value for the coat, she did not replace it. In addition to the losses shown above, her real estate broker advised that even though her house had not been damaged by the flood, the value had dropped by $20,000 since it was evident that it was located in an area prone to flooding a. Compute M's casualty loss deduction, assuming her AGI in 2017 was $18,000 and in 2018, $20,000 Assume the loss occurred on January 2, 2018 and the location was officially des- ignated a disaster area by the President. Explain when the loss could be deducted. b