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Business Casualty and Theft Losses, Personal Casualty and Theft Losses (LO. 9, 12) Marsha owns a two-family condominium in southern California that she paid $142,700 for in 2002. One unit has 2,400 square feet of space, and the other has 1,600 square feet. Marsha uses the 2,400-square-foot unit as a vacation home and rents the other unit to a retired couple. During the current year, an electrical fire destroys the condominium. Because part of it was used as rental property, Marsha's insurance company reimburses her only $119,300. The fair market value of the condominium before the fire was $152,900, and her adjusted basis in the rental unit is $20,200. Assume that Marsha's adjusted gross income before considering the casualty is $54,400 Complete the letter to Marsha explaining the effect of the casualty on her taxable income. If an amount is zero, enter "0 Dear Marsha Per your request, I am writing to explain the effects of the casualty loss on your taxable income. Because your rental property is a mixed-purpose asset, it must be accounted for as two assets a business asset and a personal asset. The best method for allocafing between the business and personal portion of the condominium is based on the total square footage of the two units. This calculates to L 96 of the casualty loss being business related and the remaining % personal. The gain or loss from the casualty is computed separately, applying the appropriate rules for business and personal property to each portion, as laid out in the table below: Business Personal Initial basis Less: depreciation diusted basis Next Email Instructor Save and Exit Submit Test for Gra

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