Juanita, Who Is Single, Lives in an Area That Suffered

question 1851

Multiple Choice

Juanita, who is single, lives in an area that suffered a major hurricane which was declared a federal disaster. Her car sustained $6,200 in damages. Juanita does not expect to recover any of the loss from her insurance company. Juanita's 2018 AGI is $31,000, and she deducts a $3,000 loss after applying limitations on her 2018 tax return. Her other itemized deductions in 2018 exceed $12,000. In 2019, Juanita's insurance company reimburses her $2,800. Juanita's 2019 AGI is $28,000. As a result, Juanita must

• A) do nothing and simply keep the $2,800.
• B) amend 2018 to show a $200 loss.
• C) do nothing to the 2018 return but report $2,800 of income on her 2019 return.
• D) amend the 2018 return to show $0 loss and file her 2019 return to show a $200 loss.

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Definitions:

Times Interest Earned Ratio

This ratio measures a company's ability to meet its debt obligations based on its current income, calculated as earnings before interest and taxes divided by interest expense.

Income Before Taxes

The amount of revenue left after deducting all operating expenses, interest, and depreciation, but before paying income taxes.

Straight-Line Method

A depreciation technique where an equal amount of depreciation is charged for each year of the asset's useful life.

Semiannual Interest

Interest that is calculated and paid twice a year, often used in the context of bonds and loans.