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.

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Definitions:

Cortex

The outermost layer of the brain, responsible for complex functions including thought, memory, and consciousness.

Frontal Lobe

The part of the brain located at the front of each cerebral hemisphere, responsible for voluntary movement and has a role in activities such as decision-making, problem-solving, and planning.

Motor Cortex

The region of the cerebral cortex involved in planning, controlling, and executing voluntary movements.

Occipital Lobes

The region of the brain located at the back of the head, primarily responsible for processing visual information.