In 2013,Sarah (Who Files as Single)had Silverware Worth $10,000 (Basis

question 116

Multiple Choice

In 2013,Sarah (who files as single) had silverware worth $10,000 (basis $6,000) stolen from her home.Sarah's insurance company told her that her policy did not cover the theft.Sarah's other itemized deductions last year were $2,000.She had AGI of $30,000 last year.In August of 2014,Sarah's insurance company decided that Sarah's policy did cover the theft of the silverware and they paid Sarah $5,000.Determine the tax treatment of the $5,000 received by Sarah during 2014.

• A)None of the $5,000 should be included in gross income.
• B)$2,900 should be included in gross income.
• C)$5,000 should be included in gross income.
• D)Last year's return should be amended to include the $5,000.
• E)None of these.

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