104Dons personal auto was damaged in a wind storm this year

104.Don\'s personal auto was damaged in a wind storm this year. Don purchased the auto several years ago for $32,000 and it was worth $18,000 at the time of the storm. The damage was superficial, so Don decided not to repair the car. Although Don collected $750 from his insurance company, the value of the car dropped after the storm to $15,000. What is the amount of casualty loss from the storm damage before Don applie any floor limitations?

Solution

Answer:

$3,000

As decrease in FMV is smaller than the adjusted cost of the auto, decrease in FMV:is taken as loss reduced by insurance amount received:

Amount of casualty loss before Don applies any floor limitation and before $100 rule = $3,000 - $750 = $2,250

Loss after $100 rule before Don applies any floor limitation = $2,250 - $100 = $2,150

1.	Adjusted basis (cost in this example)	$32,000
2.	FMV before storm	$18,000
3.	FMV after storm	$15,000
4.	Decrease in FMV ($18,000 - $15,000)	$3,000