Question

Question 12 of 15 On June 14 of the tax year, Tanya's Sailboat sank off the coast of California due to a terrible storm. The fair market value of the sailboat before the casualty was $49.000. She bought the boat ten years earlier for $24.000. Her insurance company reimbursed her $39.000. On December 23 of the tax yea she purchased a smaller sailboat For $28,000. What is her recognized capital gain for the year of the casualty? O $0 $11,000 $15,000 $39,000

Answer 1

Answer. The correct option is second one $11,000.

The realized gain for the year of casualty is $15,000 (Insurance Claim 39,000 - $24,000 Cost of car). The excess of Insurance Claim over the cost in involuntary conversion of sailboat.

Tanya spent $28,000, less than the proceed of insurance claim she received $39,000. She will recognize taxable gain to the extent of amount not reinvested in sailboat. Taxable gain is $39,000 - $28,000 = $11,000. Her basis in new sailboat would still be $24,000.