In 2010, Grant’s personal residence was damaged by fire. Grant was insured for 90% of his actual loss, and he received the insurance settlement. Grant had adjusted gross income, before considering the casualty item, of $30,000. Pertinent data with respect to the residence follows:

Cost basis $170,000
Value before casualty 250,000
Value after casualty 150,000
What is Grant’s allowable casualty loss deduction?

a. $0.
b. $6,500.
c. $6,900.
d. $10,000.
e. $80,000.

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Answer is C. He gets $90,000 from the insurance (250,000-150,000) x 90%. The loss is $10,000 after reimbursement (250,000-150,000-90,000). 10,000-100-3,000=6,900