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:

Machine Language

The lowest-level programming language, consisting of binary code that the computer's processor can directly execute.

High-Level Languages

Programming languages that are more abstract, easier to use, and closer to human languages than machine code, facilitating easier software development.

Machine Languages

Low-level programming languages that are directly executed by a computer's CPU.