Constance,who Is Single,is in an Automobile Accident in 2014,and Her

question 51

Multiple Choice

Constance,who is single,is in an automobile accident in 2014,and her car sustains $6,200 in damages.Because both drivers received tickets in the accident,Constance does not expect to recover any of the loss from her insurance company.Constance's 2014 AGI is $31,000.Her casualty loss is $3,000; she has other itemized deductions of $1,200.In 2015,Constance's insurance company reimburses her $2,800.Constance's 2015 AGI is $28,000.As a result,Constance must

• A)amend the 2015 return to show the $200 loss.
• B)do nothing and simply keep the $2,800.
• C)amend the 2014 return to show $0 loss and file her 2015 return to show $200 loss.
• D)do nothing to the 2014 return but report $2,800 of income on her 2015 return.

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Definitions:

Forward Contracts

Financial derivatives that obligate the buyer to purchase, and the seller to sell, a particular asset at a predetermined future date and price.

Fair Value Hedge

A hedge of the exposure to changes in fair value of an asset or liability, or an unidentified firm commitment, that is attributable to a particular risk.

Cash Flow Hedge

A type of hedge that protects against the variability in cash flows arising from a particular risk, such as interest rate movements or currency fluctuations.

Foreign Exchange Loss

A loss that occurs when the value of a foreign currency declines in relation to the domestic currency, affecting transactions involving foreign currencies.