Kevin is the sole proprietor of Murphs Golf Shop. During
the current year, a hurricane hits the beach near Kevins 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 Kevins 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,
»
Kevin is the sole proprietor of Murphs Golf Shop. During
the current year, a hurricane hits the beach near Kevins 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 Kevins 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?
»