A taxpayer”s car is stolen. The taxpayer paid $22,000 for the car; it was worth $12,000 at the time it was stolen. Insurance paid her $11,000. Her adjusted gross income for the year of the theft is $45,000. What is the amount of the taxpayer”s deductible theft loss?
a. Correct. The amount of the taxpayer”s loss is $1,000 (the lesser of $22,000 adjusted basis or $12,000 FMV decreased by the $11,000 insurance reimbursement). However, after applying the $100 and 10%-of-AGI limits, the taxpayer does not have a deductible loss.
b. Incorrect. While the taxpayer”s loss is $1,000, and after applying the $100 limit, the taxpayer would have a $900 loss, the loss cannot be claimed because of the 10%-of-AGI limit.
c. Incorrect. The taxpayer”s loss of $1,000 is not deductible because of the $100 and 10%-of-AGI limits.
d. Incorrect. The taxpayer”s loss is $1,000, not $11,000, and the loss is not deductible because of the $100 and 10% limits.
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