- 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 173,833Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011