Tax Case Study
Fiona , CPA candidate
Las Vegas, NV
July 3, 2013
Relevant Facts
Sam and Barb Mendez are 100% owners of an S Corporation running information systems consulting business. The Mendez purchased a second home as a vacation home with cash for $375,000 in year 2005. Unfortunately, in 2013, the house collapsed and caused a total loss on the home when its value was $280,000 and the value of furniture and personal belongings inside the house was $50,000. The homeowner’s policy will only cove 50% of the value of the loss.
Specific Issues 1. Whether Sam can claim any type of tax deduction on his individual return for the damages to the house. 2. If so, how is the amount of the deduction determined?
Conclusions
1. Sam can claim itemized …show more content…
A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Evidentially, the total loss the Mendezs suffered from their second home collapsing into a sink hole is (would?) qualified as a personal casualty loss under this Section. The portion of the loss sustained that is not compensated for by their homeowner insurance policy is eligible for itemized deduction provided that the Mendezs file a timely claim for …show more content…
(1) $100 Limitation per casualty – Any loss of an individual shall be allowed only to the extent that the amount of the loss to such individual arising from each casualty exceeds $100. (2) Net casualty loss allowed only to the extent it exceeds 10% of Adjusted Gross Income (AGI) of the Individual. For purpose of this Subsection (h), a husband and wife making a joint return for the taxable year shall be treated as one individual. Applying this Regulation, the amount of deduction allowed can be computed as the following:
Limitation on deduction: $100 + 10%
Las Vegas, NV
July 3, 2013
Relevant Facts
Sam and Barb Mendez are 100% owners of an S Corporation running information systems consulting business. The Mendez purchased a second home as a vacation home with cash for $375,000 in year 2005. Unfortunately, in 2013, the house collapsed and caused a total loss on the home when its value was $280,000 and the value of furniture and personal belongings inside the house was $50,000. The homeowner’s policy will only cove 50% of the value of the loss.
Specific Issues 1. Whether Sam can claim any type of tax deduction on his individual return for the damages to the house. 2. If so, how is the amount of the deduction determined?
Conclusions
1. Sam can claim itemized …show more content…
A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Evidentially, the total loss the Mendezs suffered from their second home collapsing into a sink hole is (would?) qualified as a personal casualty loss under this Section. The portion of the loss sustained that is not compensated for by their homeowner insurance policy is eligible for itemized deduction provided that the Mendezs file a timely claim for …show more content…
(1) $100 Limitation per casualty – Any loss of an individual shall be allowed only to the extent that the amount of the loss to such individual arising from each casualty exceeds $100. (2) Net casualty loss allowed only to the extent it exceeds 10% of Adjusted Gross Income (AGI) of the Individual. For purpose of this Subsection (h), a husband and wife making a joint return for the taxable year shall be treated as one individual. Applying this Regulation, the amount of deduction allowed can be computed as the following:
Limitation on deduction: $100 + 10%