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:

Mixed Strategy

In game theory, a strategy in which a player randomizes over possible actions, assigning a probability to each.

Nash Equilibrium

A concept in game theory where no player can benefit by changing their strategy while the other players keep theirs unchanged, representing a state of mutual best responses.

Expected Payoff

The anticipated return from an investment, considering all potential outcomes and their probabilities.

Sequential Game

A type of game in game theory where players make their moves one after another, with knowledge of the previous players' moves.