Kevin is the sole proprietor of Murph€™s Golf Shop. During the current year, a hurricane hits the beach near Kevin€™s shop. His business building, which has a basis of $60,000, is damaged. In addition, his personal automobile, for which he paid $22,000, is damaged. Fair market values (FMV) before and after the hurricane are

a. What is Kevin€™s gross loss in each of the above cases?
b. Assume that in case A, Kevin receives $36,000 from his insurance company for the building and $5,000 for his automobile. What is his allowable loss?
c. Assume that the insurance proceeds are $130,000 and $5,000 in case B. What is the tax effect of the casualty forKevin?

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FMV Before FMV After Case A Building $130,000 $85,000 12,000 Automobile Case B Building 3,000 $130,000 12,000 Automobile 0-