Question

QUIZLLET Robin’s automobile, which she uses exclusively in her trade or business, was damaged in an accident. The adjusted basis of the automobile prior to the accident was $8,000. The fair market value of the automobile before the accident was $10,000 and the fair market value of the automobile after the accident was $500. Insurance proceeds of $9,500 were received. What are Robin’s income tax consequences resulting from this transaction?

Answer 1

Answer:

No impact for income tax purposes.

Explanation:

The Fair market Value before accident     $10,000

The fair Market Value after accident         ($500)

Decrease in Fair Market Value after accident $9,500

Sale proceeds received  from Insurance coverage ($9,500)

Casualty Gain/(loss)                                               $0

Therefore there is no gain or loss on this transaction for income tax purposes