A Flood Damaged an Auto Owned by Mr Based on These Facts, What Is the Amount of the South

question 38

Multiple Choice

A flood damaged an auto owned by Mr. and Mrs. South on June 15 of this year. The car was only used for personal purposes. $$\begin{array} { | l | r | } \hline \text { Fair market value before the flood } & \$ 18,500 \\\hline \text { Fair market value after the flood } & 2,000 \\\hline \text { Cost basis } & 20,000 \\\hline \text { Insurance proceeds } & 13,000 \\\hline \text { Adjusted gross income for this year } & 25,000 \\\hline \text { Business use of auto } & 0 \\\hline\end{array}$$ Based on these facts, what is the amount of the South's casualty loss deduction after limitations for this year?

• A) $900
• B) $1,000
• C) $4,400
• D) $4,500

---

Definitions:

Depreciable Asset

A long-term asset subject to depreciation, reflecting the decrease in value over time due to wear and tear, age, or obsolescence.

Depreciation

The process of allocating the cost of a tangible asset over its useful life, representing how much of the asset's value has been used up.

Valuation Technique

Methods and procedures used to estimate the value of an asset, liability, or company, including discounting cash flow analysis and comparative market analysis.

Expense Recognition

The accounting principle that costs are recorded in the period they are incurred in and matched with the revenues they help to generate.