Derrick owns a farm in eastern North Carolina. A hurricane hit the area (a national disaster area was declared) and destroyed a farm building and some farm equipment and damaged a barn. Item Adjusted Basis FMV before Damage FMV after Damage Insurance Proceeds Building $ 119,100 $ 163,500 $ 0 $ 74,700 Equipment 90,600 66,800 0 17,100 Barn 133,300 212,500 133,300 57,700 Due to the extensive damage throughout the area, the president of the United States declared all areas affected by the hurricane as a disaster area. Derrick, who files a joint return with his wife, had $46,800 of taxable income last year. Their taxable income for the current year is $155,400, excluding the loss from the hurricane. Required: a-1. Calculate the amount of the loss deductible by Derrick and his wife. a-2. What amount of loss should be adjusted against current and last year?
Derrick owns a farm in eastern North Carolina. A hurricane hit the area (a national disaster area was declared) and destroyed a farm building and some farm equipment and damaged a barn.
| Item | Adjusted Basis | FMV before Damage | FMV after Damage | Insurance Proceeds |
|---|---|---|---|---|
| Building | $ 119,100 | $ 163,500 | $ 0 | $ 74,700 |
| Equipment | 90,600 | 66,800 | 0 | 17,100 |
| Barn | 133,300 | 212,500 | 133,300 | 57,700 |
Due to the extensive damage throughout the area, the president of the United States declared all areas affected by the hurricane as a disaster area. Derrick, who files a joint return with his wife, had $46,800 of taxable income last year. Their taxable income for the current year is $155,400, excluding the loss from the hurricane.
Required:
a-1. Calculate the amount of the loss deductible by Derrick and his wife.
a-2. What amount of loss should be adjusted against current and last year?
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