points

Item $5$

Problem $6-53($LO $6-5)$

Derrick owns a farm in eastern North Carolina. A hurricane hit the area $($a national disaster area was declared$)$ and destroyed a farm building and some farm equipment and damaged a barn.

Item Adjusted Basis FMV before Damage FMV after Damage Insurance Proceeds

Building $ $85,000$ $ $115,000$ $ $0$ $ $55,000$

Equipment $68,00049,000015,000$

Barn $95,000145,00095,00035,000$

Due to the extensive damage throughout the area, the president of the United States declared all areas affected by the hurricane as a disaster area. Derrick, who files a joint return with his wife, had $$45,000$ of taxable income last year. Their taxable income for the current year is $$150,000,$ excluding the loss from the hurricane.

Required:

a$-1.$ Calculate the amount of the loss deductible by Derrick and his wife.

a$-2.$ What amount of loss should be adjusted against current and last year?