Kat owns a small bungalow which is destroyed in a fire. Kat is not insured for fire. The bungalow originally cost $22,000, but was worth $45,000 before the fire. Kat has $30,000 of adjusted gross income. How much can Kat claim as a casualty loss in her tax return? Explain
Kat can claim the basis of the house as a casualty since it is lower than the fair market value of the house. The $22,000 basis must be reduced by 10 percent of Kat's adjusted gross income plus a $100 floor, for a total of $3,100 . Therefore, $18,900 is allowed as a deduction on Kat's Schedule A.
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a. True b. False Indicate whether the statement is true or false
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Answer the following statement true (T) or false (F)