Facts: Our firm's clients, Joe and Wanda Smith, reside and work in San Francisco, California. They own
Question:
Facts: Our firm's clients, Joe and Wanda Smith, reside and work in San Francisco, California. They own a vacation property in South Carolina. They've heard in news reports that Hurricane Florence will be heading towards their vacation property in South Carolina. Several years ago, they purchased their vacation home for $500,000. They've fully paid off their mortgage on the South Carolina property and own it outright. Currently, it's valued at $500,000. Their adjusted cost basis is $500,000. Joe and Wanda have basic insurance on the property but no flood insurance. Joe and Wanda are concerned about partial or full loss of their vacation property due to Hurricane Florence and ask for our firm's advice on the possible tax consequences if they suffer any casualty loss from the storm in 2018. We must determine how to proceed as their tax advisors. Conduct research and address the following questions:
- What is the tax issue statement?
- Based on your research, what tax law/guidance applies in this case?
- What additional facts, if any, do we need to provide tax advice to our clients?