Riley operates a plumbing business and this year the 3-year old van he used in the business was destroyed in a traffic accident. The van was originally purchased for $20,000 and the adjusted basis was $5,800 at the time of the accident. Although the van was worth $6,000 at the time of accident, insurance only paid Riley $1,200 for the loss. What is the amount of Riley's casualty loss deduction?

A. $6,000

B. $14,000

C. $5,800

D. $4,600

E. $5,300

Question

Business

Scott Campbell

10 January, 15:05

Riley operates a plumbing business and this year the 3-year old van he used in the business was destroyed in a traffic accident. The van was originally purchased for $20,000 and the adjusted basis was $5,800 at the time of the accident. Although the van was worth $6,000 at the time of accident, insurance only paid Riley $1,200 for the loss. What is the amount of Riley's casualty loss deduction?

A. $6,000

B. $14,000

C. $5,800

D. $4,600

E. $5,300

+4

Answers (1)

Know the Answer?

William Rollins · Answer 1

D. $4,600

Explanation:

Riley's casualty cost deduction comes from the substraction between the adjusted basis, which is the net cost of an asset after adjusting for various tax-related items, and the amount the insurance paid Riley.