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On June 14 this year my sailboat sunk off the coast of California due to a terrible storm. The fair market value of the sailboat before the casualty is $49,000. I bought the boat on May 15, 1997, for $24,000. My insurance company reimbursed me $39,000. On December 14th of this year I purchased a smaller sailboat for $28,000. How much capital gain is recognized on my return for the year of my casualty?
ANSWER
Expert Carlton Melton's Answer:
The amount of gain you must recognize for the 2012 tax year, for the casualty loss, will be $11,000. This is the difference between the amount that you were reimbursed by your insurance company and the amount that was spent on a replacement sailboat.
The $11,000 long-term gain will be combined on Schedule D with other long-term gains and long-terms losses to come to a total long-term gain or loss for the year.
