In $2024,$ Kelsey sustained a loss on the theft of a painting. She had paid $$20,000$ for the painting, but it was worth $$40,000$ at the time of the theft.

What are the tax consequences of treating the painting as $($a$)$ investment property or as $($b$)$ personal use property?

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a$.$ If the painting is treated as investment property, the loss is

personal in nature but not deductible since not related to a Federally declared disaster areaan itemized deduction not subject to the $$100-$per$-$event and the $10\%-$of$-$AGI limitationsdeductible for AGI

$.$ Before adjustments $($if any$),$ the loss is limited to the

adjusted basisfair market valuelesser of decline in fair market value or the adjusted basis

of the property at the time of destruction.

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b$.$ If the painting is treated as personal$-$use property, the loss is

a casualty and theft loss but not deductible since it is not related to a Federally declared disaster areaa non$-$miscellaneous itemized deduction subject to a $2\%-$of$-$AGI floordeductible for AGI

$.$ Before adjustments $($if any$),$ the loss is limited to the

adjusted basisfair market valuelesser of decline in fair market value or the adjusted basis

of the property at the time of destruction.