Alma Is in the Business of Dairy Farming

question 49

Multiple Choice

Alma is in the business of dairy farming. During the year, one of her barns was completely destroyed by fire. The adjusted basis of the barn was $90,000. The fair market value of the barn before the fire was $75,000. The barn was insured for 95% of its fair market value, and Alma recovered this amount under the insurance policy. Alma has adjusted gross income for the year of $40,000 (before considering the casualty) . Determine the amount of loss she can deduct on her tax return for the current year.

• A) $3,750
• B) $14,650
• C) $14,750
• D) $18,750
• E) None of the above

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Definitions:

Skimming Pricing Policy

A pricing strategy where a high price is set for a new product to maximize profits from market segments willing to pay more.

High Quality

Describes products or services that meet or exceed consumer expectations and standards in performance, durability, and satisfaction.

Price-sensitive

Referring to the characteristic of consumers whose buying decisions are greatly influenced by the price of a product or service.

Price Level

The average of current prices across the entire spectrum of goods and services in an economy, reflecting inflation or deflation.