Business Casualty or Theft Gains and Loss
Response to the following problem:
S.R.W. Inc. had an expensive sculpture stolen from the lobby of its offices. The sculpture was insured, and S.R.W. realized a $80,000 gain from the theft. This was S.R.W.'s only casualty or theft for the year.
a. Discuss the tax consequences of this theft on S.R.W.'s tax return if S.R.W. has $100,000 of Section 1231 gains.
b. Same as in Part a., except that S.R.W. has $100,000 of Section 1231 losses.