Sally is an employee of Blue Corporation. Last year, she purchased a very expensive computer with her own funds. She used the computer 100% for business purposes. During the current year, the computer was completely destroyed in a fire. Blue Corporation did not reimburse her for her loss.

• Discuss whether Sally’s loss will create or increase Sally’s net operating loss. How does Sally treat the loss (carryback or/and carryforward periods)? 
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• If a taxpayer who sustains a casualty loss in an area designated by the President of the United States as a disaster area, he or she may take the loss in the year in which the loss occurred or elect to take the loss in the previous year.
• Identify factors that should be considered in deciding in which year to take the loss.

Answer rating: 100% (QA)

ANSWER 1 The result of a companys allowable deductions surpassing its taxable revenue during a tax p... View the full answer