For each of the following situations, determine whether the item is deductible, and discuss any limitations that might be placed on the deduction.
Rioters damage Margarita's business building, which has an adjusted basis of $50,000, during the current year
a. Assume the building is totally destroyed. The cost of replacing the building is estimated to be $55,000 . Margarita's insurance reimburses her $32,000.
b. Assume the building is severely damaged. Before the riot, the building is worth $55,000 . The insurance adjuster estimates the value of the building after the damage at $20,000 . Margarita's insurance reimbursed her $32,000.
a. Margarita can deduct $18,000 ($50,000 - $32,000) as a business casualty loss. The measure of loss on business property that is fully destroyed is the property's adjusted basis, $50,000 . The $50,000 loss is reduced by the $32,000 insurance proceeds.
b. Margarita can deduct $3,000 ($35,000 - $32,000) as a business casualty loss. The measure of loss on business property that is partially destroyed is the lesser of 1) the decrease in the fair market value of the property, $35,000 ($55,000 - $20,000) or 2) the property's adjusted basis, $50,000 . The $35,000 decrease in market value attributable to the casualty is reduced by the $32,000 of insurance proceeds.
You might also like to view...
FUTA taxes are:
A. Employee income taxes. B. Medicare taxes. C. Social Security taxes. D. Employee deductions. E. Unemployment taxes.
In relationship retailing, a retailer _____
a. seeks to maximize a customer's short-term satisfaction b. prefers to attract new customers over retaining existing customers c. seeks to attract larger customers over smaller accounts d. plans to establish and maintain long-term bonds with its customers
A promissory estoppel is usually used to provide a remedy to a party who has relied on another party's promise
Indicate whether the statement is true or false
Which of the following is NOT recommended in discussing price in a sales message?
a. Introduce price only after presenting the product and its virtues. b. Keep price talk out of the first and last paragraphs, unless price is the distinctive factor. c. Mention price in a complex or compound sentence that relates or summarizes the benefits of the product. d. All of the above are recommended.