Problem 7-34 (LO. 3, 4) Heather owns a two-story building. The building is used 40% for business use and 60% for personal use. During 2020, a fire caused major damage to the building and its contents. Heather purchased the building for $800,000 and has taken depreciation of $100,000 on the business portion. At the time of the fire, the building had a fair market value of $900,000. Immediately after the fire, the fair market value was $200,000. The insurance recovery on the building was $600,000. The contents of the building were insured for any loss at fair market value. The business assets had an adjusted basis of $220,000 and a fair market value of $175,000. These assets were totally destroyed. The personal use assets had an adjusted basis of $50,000 and a fair market value of $65,000. These assets were also totally destroyed. If an amount is zero, enter "O". a. Determine the business and personal gain or loss in regard to the building and its contents. Personal Business Portion 320,000 Total $800,000 Portion 480.000 Cost or building Less: Depreciation Adjusted basis (100,000) 100,000 $700,000 220,000 480,000 Decline in $700,000 20,000 x 420.000 Business Portion Personal Portion 220,000 420,000 350.000 Loss on building (lesser of basis decline in FMV) Less Insurance reimbursement Sain en butinessetien o en Petronal portion Loss on business contents 240,000 20,000 60.000 220.000 175.000 Less Insurance recovery kess on business contents 45,000 Loss on personal contents 50.000 Less Insurance recovery $5.000 Gainen personal content 15.000 b. Heather's AGI is $100,000 before considering the effects of the fire. Determine her itemized deduction and AGI after considering the effects of the fire. Adjusted Gross Income AGI before the effects of the fire $100,000 Business gain - building 20,000 Business loss. contents 45,000) Net business casualty loss 25,000 Personal casualty gain 15,000 Personal casualty loss to extent of gain 15,000) Net personal casualty gain 0 AGI 75,000 Itemized Deduction Balance of personal casualty loss 44,900 X