Leonard owns a hotel which was damaged by a hurricane. The hotel had an adjusted basis of $1,000,000 before the hurricane. A recent appraisal determined that the hotel's FMV was $1,500,000 before the hurricane and $700,000 afterwards. Leonard received insurance proceeds of $500,000. His AGI is $60,000. What is the amount of his deductible casualty loss?
A) $293,900
B) $300,000
C) $793,900
D) $800,000
B) $300,000
For business property partially destroyed, the amount of the loss is the lower of the decline in FMV or adjusted basis. The decline in FMV is $800,000. Leonard received insurance proceeds of $500,000, resulting in a deductible casualty loss of $300,000.
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