Question 1

A nonbusiness bad debt deduction can be taken any year after the debt becomes totally worthless.

Accepted Answer

A) True 
 B)False

Question 2

Taxpayer's home was destroyed by a storm in the current year in a Federally-declared disaster area. If the taxpayer elects to treat the loss as having occurred in the prior year, it will be subject to the 10%-of-AGI reduction based on the AGI of the current year.

Accepted Answer

A) True 
 B)False

Question 3

If a taxpayer sells their § 1244 stock at a loss, all of the loss will be ordinary loss.

Accepted Answer

A) True 
 B)False

Question 4

Regarding research and experimental expenditures, which of the following are not qualified expenditures?

Accepted Answer

A)  Costs of ordinary testing of materials. 
B)  Costs to develop a plant process. 
C)  Costs of developing a formula. 
D)  Depreciation on a building used for research. 
E)  All of the above are qualified expenditures. 
A)  Costs of ordinary testing of materials. 
B)  Costs to develop a plant process. 
C)  Costs of developing a formula. 
D)  Depreciation on a building used for research. 
E)  All of the above are qualified expenditures.

Question 5

In the current year, Juan's home was burglarized. Juan had the following items stolen: ∙ Securities worth $25,000. Juan purchased the securities four years ago for $20,000.
∙ New tools which Juan had purchased two weeks earlier for $8,000. Juan uses the tools in making repairs at an apartment house that he owns and manages.
∙ An antique worth $15,000. Juan inherited the antique a family keepsake) when the property was worth $11,000.
Juan's homeowner's policy had a $50,000 deductible clause for thefts. If Juan's salary for the year is $50,000, determine the amount of his itemized deductions as a result of the theft.

Accepted Answer

A)  $3,100 
B)  $6,000 
C)  $26,100 
D)  $26,500 
E)  None of the above 
A)  $3,100 
B)  $6,000 
C)  $26,100 
D)  $26,500 
E)  None of the above

Question 6

"Other casualty" means casualties similar to those associated with fires, storms, or shipwrecks.

Accepted Answer

A) True 
 B)False

Question 7

Al, who is single, has a gain of $40,000 on the sale of § 1244 stock small business stock) and a loss of $80,000 on the sale of § 1244 stock. As a result, Al has a $40,000 ordinary loss.

Accepted Answer

A) True 
 B)False

Question 8

Five years ago, Tom loaned his son John $20,000 to start a business. A note was executed with an interest rate of 8%, which is the Federal rate. The note required monthly payments of the interest with the $20,000 due at the end of ten years. John always made the interest payments until last year. During the current year, John notified his father that he was bankrupt and would not be able to repay the $20,000 or the accrued interest of $1,800. Tom is an accrual basis taxpayer whose only income is salary and interest income. The proper treatment for the nonpayment of the note is:

Accepted Answer

A)  No deduction. 
B)  $3,000 deduction. 
C)  $20,000 deduction. 
D)  $21,800 deduction. 
E)  None of the above. 
A)  No deduction. 
B)  $3,000 deduction. 
C)  $20,000 deduction. 
D)  $21,800 deduction. 
E)  None of the above.

Question 9

The amount of partial worthlessness on a nonbusiness bad debt is deducted in the year partial worthlessness is determined.

Accepted Answer

A) True 
 B)False

Question 10

In 2017, Sarah who files as single) had silverware worth $10,000 basis $6,000) stolen from her home. Sarah's insurance company told her that her policy did not cover the theft. Sarah's other itemized deductions last year were $2,000. She had AGI of $30,000 last year. In August of 2018, Sarah's insurance company decided that Sarah's policy did cover the theft of the silverware and they paid Sarah $5,000. Determine the tax treatment of the $5,000 received by Sarah during 2018.

Accepted Answer

A)  None of the $5,000 should be included in gross income. 
B)  $2,900 should be included in gross income. 
C)  $5,000 should be included in gross income. 
D)  Last year's return should be amended to include the $5,000. 
E)  None of the above. 
A)  None of the $5,000 should be included in gross income. 
B)  $2,900 should be included in gross income. 
C)  $5,000 should be included in gross income. 
D)  Last year's return should be amended to include the $5,000. 
E)  None of the above.

Question 11

John files a return as a single taxpayer. In 2018, 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 2018.

Accepted Answer

A)  $5,000). 
B)  $0. 
C)  $45,000. 
D)  $51,000. 
E)  None of the above. 
A)  $5,000). 
B)  $0. 
C)  $45,000. 
D)  $51,000. 
E)  None of the above.

Question 12

A net operating loss occurring in 2018 can only be carried forward no carryback exists).

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Alma is in the business of dairy farming. During the year, one of her barns was completely destroyed by fire. The adjusted basis of the barn was $90,000. The fair market value of the barn before the fire was $75,000. The barn was insured for 95% of its fair market value, and Alma recovered this amount under the insurance policy. Alma has adjusted gross income for the year of $40,000 before considering the casualty). Determine the amount of loss she can deduct on her tax return for the current year.

Accepted Answer

A)  $3,750 
B)  $14,650 
C)  $14,750 
D)  $18,750 
E)  None of the above 
A)  $3,750 
B)  $14,650 
C)  $14,750 
D)  $18,750 
E)  None of the above

Question 15

Which of the following events would produce a deductible loss in 2018?

Accepted Answer

A)  Erosion of personal use land due to rain or wind. 
B)  Termite infestation of a personal residence over a several year period. 
C)  Damages to personal automobile resulting from a taxpayer's willful negligence. 
D)  A misplaced diamond ring. 
E)  None of the above. 
A)  Erosion of personal use land due to rain or wind. 
B)  Termite infestation of a personal residence over a several year period. 
C)  Damages to personal automobile resulting from a taxpayer's willful negligence. 
D)  A misplaced diamond ring. 
E)  None of the above.

Question 16

Jed is an electrician. Jed and his wife are accrual basis taxpayers and file a joint return. Jed wired a new house for Alison and billed her $15,000. Alison paid Jed $10,000 and refused to pay the remainder of the bill, claiming the fee to be exorbitant. Jed took Alison to Small Claims Court for the unpaid amount and was awarded a $2,000 judgement. Jed was able to collect the judgement but not the remainder of the bill from Alison. What amount of loss may Jed deduct in the current year?

Accepted Answer

A)  $0 
B)  $2,000 
C)  $3,000 
D)  $5,000 
E)  None of the above 
A)  $0 
B)  $2,000 
C)  $3,000 
D)  $5,000 
E)  None of the above

A nonbusiness bad debt deduction can be taken any year after the debt becomes totally worthless.

Taxpayer's home was destroyed by a storm in the current year in a Federally-declared disaster area. If the taxpayer elects to treat the loss as having occurred in the prior year, it will be subject to the 10%-of-AGI reduction based on the AGI of the current year.

If a taxpayer sells their § 1244 stock at a loss, all of the loss will be ordinary loss.

Regarding research and experimental expenditures, which of the following are not qualified expenditures?

"Other casualty" means casualties similar to those associated with fires, storms, or shipwrecks.

Al, who is single, has a gain of $40,000 on the sale of § 1244 stock small business stock) and a loss of $80,000 on the sale of § 1244 stock. As a result, Al has a $40,000 ordinary loss.

The amount of partial worthlessness on a nonbusiness bad debt is deducted in the year partial worthlessness is determined.

John files a return as a single taxpayer. In 2018, 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 2018.

A net operating loss occurring in 2018 can only be carried forward no carryback exists).

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

Which of the following events would produce a deductible loss in 2018?

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Tax Formula and Tax Determination an Overview of Property Transactions

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Alternative Minimum Tax

Tax Credits and Payment Procedures

Property Transactions: Determination of Gain or Loss and Basis Considerations

Property Transactions: Nontaxable Exchanges

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

A nonbusiness bad debt deduction can be taken any year after the debt becomes totally worthless.

Taxpayer's home was destroyed by a storm in the current year in a Federally-declared disaster area. If the taxpayer elects to treat the loss as having occurred in the prior year, it will be subject to the 10%-of-AGI reduction based on the AGI of the current year.

If a taxpayer sells their § 1244 stock at a loss, all of the loss will be ordinary loss.

Regarding research and experimental expenditures, which of the following are not qualified expenditures?

"Other casualty" means casualties similar to those associated with fires, storms, or shipwrecks.

Al, who is single, has a gain of $40,000 on the sale of § 1244 stock small business stock) and a loss of $80,000 on the sale of § 1244 stock. As a result, Al has a $40,000 ordinary loss.

The amount of partial worthlessness on a nonbusiness bad debt is deducted in the year partial worthlessness is determined.

John files a return as a single taxpayer. In 2018, 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 2018.

A net operating loss occurring in 2018 can only be carried forward no carryback exists).

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

Which of the following events would produce a deductible loss in 2018?

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Tax Formula and Tax Determination an Overview of Property Transactions

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Alternative Minimum Tax

Tax Credits and Payment Procedures

Property Transactions: Determination of Gain or Loss and Basis Considerations

Property Transactions: Nontaxable Exchanges

Filters