[hanseny007]

Hi, this question is from AICPA Practice exam SIM.
It is asking the maximum amount of deductible theft and casualty loss for the below scenario disregarding floor or AGI limitations.

I thought the answer would be $2,300, which is the lesser of 1) AB ($23,500) or 2) Decline in Fair market value of $2,300 ($23,500 – 17,200).

The correct answer is $19,500. I am thinking that the reason behind of it is that we really don’t care about the value when the tax return was prepared…? Can anyone confirm it?

Berry reported a car as stolen on 11/28/02.
At the time the tax return was prepared, the car had not been located, and the police indicated that it was unlikely the car would be found.
Berry purchased the car on 7/4/02 for $23,500. According to a valuation report, the fair market value of the car in November 2, was $19,500.
The fair market value of the same car at the time of preparing the return was $17,200.
Berry’s insurance policy does not cover theft.

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[Recked]

Fair value at date or loss vs value after loss.
FMV at date was 19,500, and value after it was stolen is 0.

Your answer makes no sense, unless you are assuming his insurance reimbursed him the 19,500, so he was only out 2300.
The question does not say or imply that. The 17,200 is simply distractor information.

Memento Mori - Kingston NY CPA & EA (SUNY Albany 2002)

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[hanseny007]

@Recked You are right, 17,200 was just a distractor 🙂 Thank you so much!!!

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[Author]

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