Items 1 and 2 are based on the following selected 2007 information pertaining to Sam and Ann Hoyt, who filed a joint federal income tax return for the calendar year 2007. The Hoyts had adjusted gross income of $34,000 and itemized their deductions for 2007. Among the Hoyts’ cash expenditures during 2007 were the following:
$2,500 repairs in connection with 2007 fire damage to the Hoyt residence. This property has a basis of $50,000. Fair market value was $60,000 before the fire and $55,000 after the fire. Insurance on the property had lapsed in 2006 for nonpayment of premium.
$800 appraisal fee to determine amount of fire loss.
What amount of fire loss were the Hoyts entitled to deduct as an itemized deduction on their 2007 return?
- $5,000
- $2,500
- $1,600
- $1,500
The appraisal fee to determine the amount of the Hoyts’ fire loss was
- Deductible from gross income in arriving at adjusted gross income.
- Subject to the 2% of adjusted gross income floor for miscellaneous itemized deductions.
- Deductible after reducing the amount by $100.
- Not deductible.