Norm's Car, Which He Uses 100% for Personal Purposes, Was

question 123

Multiple Choice

Norm's car, which he uses 100% for personal purposes, was completely destroyed in an accident in 2017. The car's adjusted basis at the time of the accident was $13,000. Its fair market value was $10,000. The car was covered by a $2,000 deductible insurance policy. Norm did not file a claim against the insurance policy because of a fear that reporting the accident would result in a substantial increase in his insurance rates. His adjusted gross income was $14,000 (before considering the loss) . What is Norm's deductible loss?

• A)$0
• B)$100
• C)$500
• D)$9,500
• E)None of the above

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Definitions:

Risky Stock

Stocks with a high degree of risk, typically characterized by high volatility and potential for significant loss or gain.

Mean Distribution

A statistical term describing the central tendency of a probability distribution, often interpreted as the average of a set of values.

Portfolio Theory

A framework for constructing a portfolio of assets aimed at maximizing return for a given level of risk.

Business-Specific Risk

Variation in the return on a stock investment caused by things that affect specific businesses or industries.