Sammy and Janet were married in 1977 in Texas and lived there all their lives. I

Question

Sammy and Janet were married in 1977 in Texas and lived there all their lives. In 20x1 Sammy had purchased a home for $100000 with an inheritance from his mom which was used as rental property by the household. Rent income was $12000, expenses totaled $7000 for the year. Janet inherited some acreage in 20x4 and leased the property on a grazing lease.The grazing lease earned $4000 and expenses $2000were paid from community funds.Sammys house burned down and was a total loss. there was no insurance. Whiich of the following statements is true?

a. Sammy gets 100% of the loss B Sammy gets 50% of the loss C Sammy is limited to a 25% write off D Sammy is unable to deduct any loss

Explanation / Answer

Answer:

Correct answer is:

a. Sammy gets 100% of the loss

Explanation:

Sammy's property was income-producing property (rental property), and is completely destroyed (house was completely burned down and was a total loss) and hence the amount of loss is Sammy's adjusted basis in the house property. Hence Option A is correct.

The house was rental property and it was a total loss due to fire. As such amount of adjusted basis in the house is allowed as loss. The other options (b), (c) and (d) are incorrect.

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