Ch 8 Casualty Losses

Question 0

Deductible casualty loss is classified by IRS as?

Answer 0

Sudden, unexpected and unusual

Event must be identifiable

Question 1

Individuals may take limited deductions if loss on personal use of property arises from (5 things)…

Answer 1

1 fire
2 storm
3 shipwreck
4 other casualty
5 theft

Question 2

Theft

Answer 2

Larceny, embezzlement, robbery

Question 3

Measuring casualty loss, when properties FMV is reduced

Answer 3

Amount by which FMV is reduced

Question 4

Measuring casualty loss when property is partially destroyed

Answer 4

Use the lesser of the property’s FMV or taxpayer’s

adjusted basis

Question 5

Determining casualty loss of a totally destroyed business property

Answer 5

Taxpayer’s adjusted basis in property

Question 6

Determining casualty loss of a totally destroyed personal use property

Answer 6

Limited to lesser of reduction in FMV or properties adjusted

Basis

Question 7

How does a taxpayer establish the reduction in FMV of property?
2) what’s an alternative to establish reduction in FMV?

Answer 7

Through an appraisal

2) using the cost of repairs

Question 8

2 limitations on personal use property

Answer 8

1 losses sustained in each separate casualty must be
reduced by $100

2 total amount of all net casualty losses for personal use
Property is reduced by 10% of taxpayer’s AGI for the year

Question 9

If the taxpayer’s insurance covers the property, can the tax payer take a casualty loss deduction?

Answer 9

Only if the taxpayer timely files an insurance claim for the

Loss

Question 10

Netting casualty gains and losses

Answer 10

Only netted on personal property

Should be treated as capital gain or loss

Question 11

If casualty losses on personal use property exceed the casualty gains, the taxpayer must…

Answer 11

Reduce net loss by 10% of AGI, before reporting loss on

Itemized deductions

Question 12

If the losses exceed the gains for business and investment property that generate rents or royalties are…

Answer 12

Deductions for AGI

Question 13

Losses on investment property through theft are…

Answer 13

Deductions from AGI, but not subject to 2% AGI floor

Question 14

What does not apply to casualty losses attributable to investment or business property?

Answer 14

$100 or 10% of AGI limitations don’t apply to deductions

Question 15

When may tax payers deduct a theft loss?

Answer 15

In year they discover theft

Question 16

Reimbursement for losses

Answer 16

Tax payers must subtract any reimbursement received for
Compensation for loss

Deduction may not be taken that year if full recovery is
expected

Question 17

Recovery of previously deducted casualty loss

Answer 17

Taxpayer includes reimbursement in income

Question 18

Disaster losses if declared by president of the united states as disaster area, that occur in 2014?

Answer 18

Can be deducted in 2013 to give taxpayer relief sooner