Kevin is the sole proprietor of Murph’s Golf Shop. During the current year, a hurricane hits the…

Kevin is the sole proprietor of Murph’s Golf Shop. During
the current year, a hurricane hits the beach near Kevin’s shop. His business
building, which has a basis of $60,000, is damaged. In addition, his personal
automobile, for which he paid $22,000, is damaged. Fair market values (FMV)
before and after the hurricane are

a. What is Kevin’s gross loss in each of the above cases?

b. Assume that in case A, Kevin receives $36,000 from his
insurance company for the building and $5,000 for his automobile. What is his
allowable loss?

c. Assume that the insurance proceeds are $130,000 and
$5,
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Kevin is the sole proprietor of Murph’s Golf Shop. During
the current year, a hurricane hits the beach near Kevin’s shop. His business
building, which has a basis of $60,000, is damaged. In addition, his personal
automobile, for which he paid $22,000, is damaged. Fair market values (FMV)
before and after the hurricane are

a. What is Kevin’s gross loss in each of the above cases?

b. Assume that in case A, Kevin receives $36,000 from his
insurance company for the building and $5,000 for his automobile. What is his
allowable loss?

c. Assume that the insurance proceeds are $130,000 and
$5,000 in case B. What is the tax effect of the casualty for Kevin?

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