FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 7: Deductions and Losses: Certain Business Expenses and Losses

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 31

True/False

Review LaterAdd Note

Review Later

A business bad debt is a debt unrelated to the taxpayer's trade or business either when it was created or when it became worthless.

A) True
B) False

Correct Answer

verified

Show Answer

Question 32

Essay

Review LaterAdd Note

Review Later

What are the three methods of handling research and experimental expenditures incurred in a trade or business? Under what circumstances would you choose each?

Correct Answer

verified

The following methods are permitted:
-Th...

View Answer

Show Answer

Question 33

Multiple Choice

Review LaterAdd Note

Bill,age 40,is married with two dependents.Bill had the following items for the 2014 year: $\begin{array}{lr}\text { Bill's business loss } & (\$ 40,000) \\\text { Bill's salary } & 50,000 \\\text { Personal casualty gains } & 5,000 \\\text { Personal casualty loss (after } \$ 100 \text { floor) } & (23,000) \\\text { Other itemized deductions } & (15,000) \end{array}$ Based on the above information,what is the net operating loss for Bill and his spouse for the 2014 year?

Sally is an employee of Blue Corporation.Last year,she purchased a very expensive computer with her own funds.She used the computer 100% for business purposes.During the current year,the computer was completely destroyed in a fire.Blue Corporation did not reimburse her for her loss.Discuss whether Sally's loss will create or increase Sally's net operating loss.

Red Company is a proprietorship owned by Sally,a single individual.Red manufactures and sells widgets.During 2014,an examination of Red's records shows the following items:

Steve and Holly have the following items for the current year: $\begin{array}{lr}\text { Dividend income } & \$ 8,000 \\\text { Interest income } & 7,000 \\\text { Itemized deductions (none of the amount resulted from a casualty loss) } &(13,000) \\\text { Business capital gains } & 1,000\\\text { Business capital losses } & (5,000) \\\hline\end{array}$ In calculating their net operating loss,and with respect to the above amounts only,what amount must be added back to taxable income (loss) ?

A father cannot claim a loss on his daughter's rental use property.

Tonya had the following items for last year: Salary $40,000 Short-term capital gain 12,000 Nonbusiness bad debt (25,000) Long-term capital gain 8,000 For the current year,Tonya had the following items: Salary $45,000 Collection of last year's bad debt 25,000 Determine Tonya's adjusted gross income for the current year.

A theft loss is taken in the year of the theft.

A theft loss of investment property is an itemized deduction not subject to the 2%-of-AGI floor.

John files a return as a single taxpayer.In 2014,he had the following items: -Salary of $40,000. -Loss of $65,000 on the sale of § 1244 stock acquired two years ago. -Interest income of $6,000. Determine John's AGI for 2014.

For the year 2014,Amber Corporation has taxable income of $880,000,alternative minimum taxable income of $600,000,and qualified production activities income (QPAI) of $640,000.The total W-2 wages paid to employees engaged in qualified domestic production activities are $116,000.Amber's DPAD for 2014 is:

Identify the factors that should be considered in determining whether a transaction is a business bad debt or a nonbusiness bad debt.

Last year,taxpayer had a $10,000 nonbusiness bad debt.Taxpayer also had an $8,000 short-term capital gain and taxable income of $35,000.If taxpayer collects the entire $10,000 during the current year,$8,000 needs to be included in gross income.

On July 20,2013,Matt (who files a joint return) purchased 3,000 shares of Orange Corporation stock (the stock is § 1244 small business stock) for $24,000.On November 10,2013,Matt purchased an additional 1,000 shares of Orange Corporation stock from a friend for $150,000.On September 15,2014,Matt sold the 4,000 shares of stock for $120,000.How should Matt treat the sale of the stock on his 2014 return?

A loss is not allowed for a security that declines in value.

If an account receivable written off during a prior year is subsequently collected during the current year,the amount collected must be included in the gross income of the current year to the extent it created a tax benefit in the prior year.

Nonbusiness income for net operating loss purposes includes dividends received.

An individual may deduct a loss on rental property even if it does not meet the definition of a casualty loss.

A taxpayer can carry any NOL incurred forward up to 20 years.