$100 floor for casualty loss

  • Creator
    Topic
  • #1444743
    jessanqi
    Participant

    I would like to confirm, the $100 floor is for every time loss, or every item loss?

    Thank you in advance!!!!

    Question: Walter Wilson and his wife, Wilma, went shopping on May 3, 20X5, and left their coats in their locked automobile. When they returned to the car, they found that the coats had been stolen. Neither of the coats was covered by insurance. Walter’s coat had cost $300, but was worth only $150 on the date of the theft. Wilma’s coat had cost $500 and was worth $400 on the date it was stolen. The automobile was not damaged by the theft. On Mr. and Mrs. Wilson’s joint income tax return for 20X5, how much of the theft will qualify as an itemized deduction?

    Correct Answer: $450

    Notes: The correct answer is C. To calculate Walter’s casualty loss, take the lesser of the decrease in fair market value ($150), or the basis ($300). Walter’s starting point for the casualty loss is $150. To calculate Wilma’s casualty loss, take the lesser of the decrease in fair market value ($400), or the basis ($500). Wilma’s starting point for the casualty loss is $400.

    Add Walter’s starting point of $150 to Wilma’s starting point of $400 to arrive at $550. Next, subtract $100 per casualty from the $550, which results in $450 for the itemized deduction related to the theft.

Viewing 8 replies - 1 through 8 (of 8 total)
  • Author
    Replies
  • #1444760
    Spartans92
    Participant

    If I remember correctly it is $100 loss per category. For instance, you have natural disaster and then some other circumstances that is infrequent/natural cause… that meets the casualty definition.

    BEC - 76
    REG- 67, 85
    AUD-63, 74, 80!!
    FAR-65, 62, 57, 79

    3 down 1 more to go. BEC is on the Line 🙁

    BEC- PASS

    #1444773
    jessanqi
    Participant

    Hi Spartans92,

    so according to this question, it only subject to $100 instead of $200 right?

    #1444790
    Spartans92
    Participant

    Correct because the only items/category in this case are their coats. So take the lower value of the husband and wife total 550 – 100. Good Luck with REG. I highly recommend adding in Ninja MCQ if u have time and money to spare. The only reason how I raised my score up. I did roughly 500 MCQ and all the SIMS in Ninja.

    BEC - 76
    REG- 67, 85
    AUD-63, 74, 80!!
    FAR-65, 62, 57, 79

    3 down 1 more to go. BEC is on the Line 🙁

    BEC- PASS

    #1444811
    jessanqi
    Participant

    thanks so much!!!

    #1444857
    isoceles
    Participant

    The $100 is per event. I've seen questions where they will give several losses that occurred during the same event (i.e. there's a flooding that ruined X, Y, Z), and you have to be careful to apply the $100 for just the event. Second important thing here is there is a 10% AGI floor to casualty losses that I don't see in this question.

    So any casualty losses are 3 step problems:

    1) Determine total amount of casualty (lower of FMV decline or AB)
    2) Subtract $100 per event
    3) Compare this to 10% of AGI. Excess is deductible from AGI

    I've also seen several problems where the answer will be $0 because the losses don't exceed 10%,

    #1445115
    jessanqi
    Participant

    thank you so much @isoceles!!

    it's very kind of you!

    i will remember what you guys advised, it's very helpful!

    #1445127
    JMG
    Participant

    Don't forget to deduct any insurance payout, so it can actually be a 4 step problem.

    Your fail scores are like battle scars, so wear them proudly!

    REG - 76 (expired 7/31/18)

    BEC - 69, 72, 80

    AUD - 62, 70, 74

    FAR - 50, 60

    #1445130
    jessanqi
    Participant

    sure! thank you @JMG! 🙂

Viewing 8 replies - 1 through 8 (of 8 total)
  • You must be logged in to reply to this topic.