Olaf lives in the state of Minnesota. In May 2021, a tornado hit the area and damaged his home and automobile. Applicable information is as follows: 

Because of the extensive damage caused by the tornado, the President designated the area a Federal disaster area.

Olaf and his wife, Anna, always file a joint return. Their 2020 tax return shows AGI of $180,000 and taxable income of $145,000. In 2021, their return shows AGI of $300,000 and taxable income (exclusive of the casualty loss deduction) of $225,000.

Determine the amount of Olaf and Anna’s loss and the year in which they should take the loss.

Transcribed Image Text:

Item Home Auto Adjusted Basis $350,000 60,000 FMV before $500,000 40,000 FMV after $100,000 10,000 Insurance Proceeds $280,000 20,000