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amandapill
amandapill
27.05.2020 • 
Business

Heather owns a two-story building. The building is used 40% for business use and 60% for personal use. During 2015, a fire caused major damage to the building and its contents. Heather purchased the building for $800,000 and has taken depreciation of $100,000 on the business portion. At the time of the fire, the building had a fair market value of $900,000. Immediately after the fire, the fair market value was $200,000. The insurance recovery on the building was $600,000. The contents of the building were insured for any loss at fair market value. The business assets had an adjusted basis of $220,000 and a fair market value of $175,000. These assets were totally destroyed. The personal use assets had an adjusted basis of $50,000 and a fair market value of $65,000. These assets were also totally destroyed.

If an amount is zero, enter "0".

Determine the business and personal gain or loss in regard to the building and its contents.

Determine the business and personal gain or loss in regard to the building and its contents.

Total Business
Portion Personal
Portion
Cost of building $800,000 $320,000 $480,000
Less: Depreciation (100,000) $(100,000) $0
Adjusted basis $700,000 $220,000 $480,000
Decline in FMV $700,000 $ ?
$ ?

Business
Portion Personal
Portion
Loss on building (lesser of basis or decline in FMV) $220,000 $420,000
Less: Insurance reimbursement $240,000 360,000
Gain on business portion $20,000
Loss on personal portion $60,000
Loss on business contents $220,000
Less: Insurance recovery $175,000
Loss on business contents $45,000
Loss on personal contents $ ?
Less: Insurance recovery $ ?
Gain on personal contents $ ?
Heather's AGI is $100,000 before considering the effects of the fire. Determine her itemized deduction and AGI after considering the effects of the fire.

Adjusted Gross Income
AGI before effects of accident $100,000
Business portion of building and contents:
Net loss on building and contents ?
Personal casualty gain 15,000
Personal casualty loss to extent of gain 15,000
Net personal casualty gain 0
AGI $75,000
Itemized Deduction
Balance of personal casualty loss $ ?
Less: Per event floor $ ?
Less: 10%-of-AGI floor $7500
Itemized deduction $37,400

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