Gomez, a Self-Employed Consultant, Is Involved in a Traffic Accident

question 3

Multiple Choice

Gomez, a self-employed consultant, is involved in a traffic accident with his business-use automobile. The car is totally destroyed and Gomez's insurance policy reimburses him $8,000 for the fair market value of the car immediately before the accident. His basis in the car is $11,000. What is the amount of Gomez's casualty loss deduction?

• A)$- 0 -
• B)$ 2,000
• C)$ 3,000
• D)$ 8,000
• E)$11,000

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Definitions:

Profitability Index

A financial tool that calculates the relationship between the costs and benefits of a project by dividing the present value of future cash flows by the initial investment.

Limited Funds

A condition where resources, especially money, are finite or restricted in availability.

Net Present Value

A valuation method that calculates the value of future cash flows in today's dollars by discounting them at a particular rate.