- 4 -
insurance policy was uncertain until 1995, when the Boyles and
Pacific settled the claim. Pursuant to the settlement, Pacific
paid $553,793 to reimburse the Boyles for the destruction of the
old warehouse, and the Boyles constructed a new warehouse at a
total cost of $698,935 to replace the old warehouse.4
On their 1995 Form 1040, U.S. Individual Income Tax Return,
the Boyles claimed a depreciation deduction of $7,424 and a
casualty loss in the amount of $173,833 with respect to the old
warehouse. The parties stipulated that the casualty loss was
computed as follows:5
4The Boyles’ net out-of-pocket investment to construct the
new warehouse was only $145,142 after application of the
insurance proceeds.
5The computation made by the Boyles on their 1995 return as
reflected on Form 4684, Casualties and Thefts, differs from the
stipulated computation and was as follows:
Cost or adjusted basis of property $727,626
Insurance or other reimbursement 553,793
Fair market value before casualty 750,000
Fair market value after casualty NONE
Difference 750,000
Enter the smaller of the adjusted
basis or the difference in fair market
value before and after the casualty as
the casualty loss claimed 173,833
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011