A Flood (Federally Declared Disaster) Destroyed an Antique Persian Rug

question 50

Multiple Choice

A flood (federally declared disaster) destroyed an antique Persian rug owned by Mr. and Mrs. McConnell. The couple purchased the rug for $13,000 fifteen years ago, but its appraised FMV before the flood was $42,500. Unfortunately, their homeowners' insurance policy does not cover flood damage. Compute the McConnells' casualty loss (before the 10% AGI threshold) .

• A) $42,400
• B) $42,500
• C) $13,000
• D) $12,900

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Definitions:

Contract Cost

is the total expense that a company recognizes on its books for a specific contract over its duration, encompassing labor, materials, and overhead.

Deductible IRA Contribution

A contribution to an Individual Retirement Account (IRA) for which the taxpayer can claim a tax deduction, subject to certain conditions and limits.

Pension Plan

A retirement plan funded by employers or employees, or both, paying out a fixed sum to retirees, often based on salary and years of service.

AGI

Short for Adjusted Gross Income; it is your gross income after adjustments and deductions, crucial for tax calculations.