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    Auto accident and 2013 AGI

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    Juanita, who is single, is in an automobile accident in 2012 and her car sustains $6,200 in damages. Because both drivers received tickets in the accident, Juanita does not expect to recover any of the loss from her insurance company. Juanita's 2012 AGI is $31,000, and she deducts a $3,000 loss on her 2012 tax return. Her other itemized deductions in 2012 exceed $12,000. In 2013, Juanita's insurance company reimburses her $2,800. Juanita's 2013 AGI is $28,000. As a result, Juanita must:

    A. amend 2012 to show a $200 loss.
    B. do nothing and simply keep the $2,800.
    C. do nothing to the 2012 return but report $2,800 of income on her 2013 return.
    D. amend the 2012 return to show $0 loss and file her 2013 return to show a $200 loss.

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    Solution Preview

    Her loss is $6200 and she receives a check for 2800.

    6200 - 2800 = Her actual loss is therefore $3,400. Because she ...

    Solution Summary

    This solution provides the correct answer with calculation and explanation to the auto accident/AGI tax question presented. The solution includes the correct way to arrive at the answer, and explains the limitations involved, as per the applicable year's tax law.