The Ottomans Own a Winter Cabin in Durango, Colorado

Multiple Choice

The Ottomans own a winter cabin in Durango, Colorado. They purchased the cabin in 2004 for $65,000. During 2018, a blizzard, a federally-declared disaster, partially destroys the cabin. The fair market value of the cabin after the blizzard is $70,000. The insurance company estimates that the cost of repairing the cabin will be $40,000. The insurance company will reimburse the Ottomans for 70% of the repair cost. What can they deduct as a casualty loss if their adjusted gross income for the year is $80,000?

A) $3,900
B) $4,000
C) $8,000
D) $11,900
E) $12,000