Last Year, Sarah (Who Files as Single) Had Silverware Worth

question 28

Multiple Choice

Last year, 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 $10,000. She had AGI of $30,000 last year. In August of the current year, 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 the current year.

• 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 the above.

---

Definitions:

Sterile Transfer Forceps

Specialized tools used in medical and laboratory settings to transfer sterile materials without contaminating them.

Sterile Field

A microbiologically controlled area in medical settings intended to be free from all microorganisms to prevent infection.

Cryosurgery

A surgical technique using extreme cold to destroy abnormal or diseased tissue, commonly used in the treatment of skin conditions and certain cancers.

Surgical Site

The area on the body that is the focus of a surgical operation.