In 2017, Sarah (Who Files as Single) Had Silverware Worth

question 42

Multiple Choice

In 2017, Sarah (who files as single) had silverware worth $10,000 (basis $6,000) stolen from her home. Sarah's insurance company told her that her policy did not cover the theft. Sarah's other itemized deductions last year were $2,000. She had AGI of $30,000 last year. In August of 2018, Sarah's insurance company decided that Sarah's policy did cover the theft of the silverware and they paid Sarah $5,000. Determine the tax treatment of the $5,000 received by Sarah during 2018.

• A) None of the $5,000 should be included in gross income.
• B) $2,900 should be included in gross income.
• C) $5,000 should be included in gross income.
• D) Last year's return should be amended to include the $5,000.
• E) None of the above.

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