Otto Operates a Bakery and Is on the Cash Method

question 4

Essay

Otto operates a bakery and is on the cash method and calendar year. This year, one of Otto's ovens caught fire and was partially destroyed. Otto bought it a few years ago for $20,000 and claimed depreciation of $12,000 up to the fire. Otto was charged $4,400 for repairs to the oven but the insurance company paid Otto $1,500 for the damage. What is Otto's casualty loss deduction?

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Definitions:

Zealousness

The quality of being fervently passionate or devoted to a cause, activity, or goal.

Obligation

A duty or commitment that an individual is required to fulfill by law, promise, or moral principles.

Constitution

The fundamental principles or established precedents according to which a state or other organization is governed.

Confidentially Waived

A situation where an individual voluntarily gives up their right to privacy regarding certain information.