Knox Operated a Business Which Was Damaged by a Hurricane

question 33

Essay

Knox operated a business which was damaged by a hurricane.His losses were as follows:
$\begin{array}{rrrrrrr}&&&&\text { Insurance }\\\text { Asset } & \text { Basis } & \text { FMV Before } & \text { FMV After } &\text { Proceeds }\\1 & \$ 3,000 & \$ 6,000 & \$ 0& 5,000 \\2 & 45,000 & 65,000 & 0 & 75,000 \\3 & 7,200 & 15,000 & 0 & 0\end{array}$ a.What is Knox's net casualty loss (if any)assuming his AGI is $85,000 prior to the deduction? Assume he properly replaced all assets.
b.What is his basis in replacement Asset 1 purchased for $8,000 assuming Knox elected the non-recognition of gain from an involuntary conversion?

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Definitions:

Credit Risk

The risk of loss due to a borrower's failure to make payments on any type of debt.

Sovereign Default

The failure of a country's government to meet its bond payment obligations, or to honor its debt agreements.

Largest-Ever

Describes an event, achievement, or phenomenon that surpasses all others in its category historically in magnitude or scale.

Market Breadth

An indicator used to gauge the overall direction of the stock market by analyzing the number of companies advancing versus those declining.