Casualty Loss
Response to the following problem:
The Wildes' home was damaged by a severe storm. The home had been purchased in 2000 for $73,000, excluding the cost of the land. The building's FMV just before the storm was $97,000, and its FMV after the storm was estimated at $79,000. The Wildes collected $15,000 in insurance proceeds, and their AGI is $22,000. This was their only casualty loss during the year.
a. Determine the amount that the Wildes can report as a casualty loss deduction.
b. The Wildes lived in a motel while their home was being repaired. The cost of living at the motel was $2,000 each month. Their normal living expenses are $900 per month, but only $500 of these expenses continued during the repair period. They were reimbursed at the rate of $1,900 per month for the three months they lived in the motel. How much of the reimbursement, if any, must they include in gross income?