TP has vehicle stolen. Basis in the vehicle is $40,000. Insurance reimburses $35,000. AGI is $40,000. Casualty loss would be $5,000-$100=$4900-10% of AGI or $4000=casualty loss of $900. Am I correct?
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Instead of basis
Instead of basis, use the lower of FMV or basis. Apparently he accepts the insurance valuation of $35,000, so there is no deductible loss. -
Ok, so the TP paid $40K, but 6 months later the FMV dropped to, let's say $35K, then you use $35K? I wonder, do insurance companies typically offer FMV for reimbursement? Of course on the other hand, if the basis in the vehicle is somehow lower than FMV, then you would use basis? Thanks.Comment
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Insurance companies
Insurance companies document FMV very well, to avoid expensive challenges. The client would have a hard time establishing a different value unless there was something unsual to look at. In your example, the new car lost 12% of value when he drove it out of the showroom. That's pretty reasonable.
If he took Section 179, his basis would be lower and the insurance payment would probably count as income.Comment
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feedback
Thanks J, feedback much appreciated.Comment
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