Blue Corporation incurred the following expenses in connection with the development of a new product: \[\begin{array} { l r } \text { Salaries } & \$ 100,000 \\ \text { Utilities } & 18,000 \\ \text { Materials } & 25,000 \\ \text { Advertising } & 5,000 \\ \text { Market survey } & 3,000 \\ \text { Depreciation on machine } & 9,000 \end{array}\] Blue expects to begin selling the product next year. If Blue elects to amortize research and experimental expenditures over 60 months, determine the amount of the deduction for research and experimental expenditures for the current year.

A) $0 B) $118,000 C) $143,000 D) $152,000 E) $160,000 A) $0 B) $118,000 C) $143,000 D) $152,000 E) $160,000

Jack, age 30 and married with no dependents, is a self-employed individual. For 2019, his self-employed business sustained a net loss from operations of $10,000 from operations . The following additional information was obtained from his personal records for the year: $\begin{array}{lr} \text { Nonbusiness long-term capital gain } & \$ 2,000 \\ \text { Interest income } & 6,000 \\ \text { Itemized deductions-consisting of taxes and interest } & (26,000) \end{array}$ Based on this information, what is Jack's net operating loss for 2019 if he and his spouse file a joint return?

A) ($2,000) B) ($8,000) C) ($10,000) D) ($25,000) E) ($28,000) A) ($2,000) B) ($8,000) C) ($10,000) D) ($25,000) E) ($28,000)

Stella, age 38, is single with no dependents. The following information was obtained from her personal records for the 2019 year. $\begin{array}{lr} \text { Salary } & \$ 30,000 \\ \text { Interest income } & 7,000 \\ \text { Alimony received } & 12,000 \\ \text { Individual retirement account contribution } & 2,000\\\text { Home mortgage interest expense } & 4,000 \\ \text { Property taxes } & 2,000 \\ \text { Personal casual ty loss in a Federal disaster area } & 38,000 \\ \quad \text { (after the } \$ 100 \text { floor) } & \end{array}$ Based on this information, what is Stella's net operating loss for 2019? a. $0 b. ($7,200) c. ($8,300) d. ($13,000) e. None of these.

The answer of Stella, age 38, is single with no...

Wu, who is single, reports the following items for 2019: $\begin{array}{lr} \text { Salary } & \$ 25,000 \\ \text { Interest income } & 8,000 \\ \text { Itemized deductions }(\$ 27,000 \text { attributable to dedutible casualty loss) } & (32,000) \end{array}$ What is Wu's net operating loss for 2019?

A) $0 B) ($1,000) C) ($2,000) D) ($7,000) E) None of these. A) $0 B) ($1,000) C) ($2,000) D) ($7,000) E) None of these.

In 2019, Mary had the following items: $\begin{array}{lr} \text { Salary } & \$ 30,000 \\ \text { Personal use casualty gain } & 10,000 \\ \text { Personal use casualty loss (after } \$ 100 \text { floor) } & 17,000 \\ \text { Other itemized deductions } & 4,000 \end{array}$ Assuming that Mary files as head of household (has one dependent child), determine her taxable income for 2019.

A) $11,650 B) $12,800 C) $13,900 D) $21,900 E) None of these. A) $11,650 B) $12,800 C) $13,900 D) $21,900 E) None of these.

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

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

(Essay)

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Question 41

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

(Multiple Choice)

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Question 42

Juanita, single and age 43, reports the following items for 2019: Salary \ 60,000 Interest income 6,000 Casualty loss on business property (15,000) Casualty loss on rental property (5,000) Loss on theft of securities (8,000) Personal casualty gains 9,000 Personal casualty loss (after \ 100 floor) (13,000) Other itemized deductions (9,000) Compute Juanita's taxable income for 2019.

(Essay)

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Question 43

Jim had a car accident in 2019 in which his car was completely destroyed. At the time of the accident, the car had a fair market value of $30,000 and an adjusted basis of $40,000. Jim used the car 100% of the time for business use. He received an insurance recovery of 70% of the value of the car at the time of the accident. If Jim's AGI for the year is $60,000, determine his deductible loss on the car.

(Multiple Choice)

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Question 44

Neal, single and age 37, reports the following items for 2019: Salary \ 50,000 Casualty loss on business property (8,000) Casualty loss on rental property (5,000) Federal disaster area personal casualty gains 3,000 Federal disaster area personal casualty losses (after \1 00 floor) (12,000) Interest expense and taxes on personal (11,700) residence Determine Neal's taxable income for 2019.

(Essay)

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Question 45

Janice, single, reports the following items for 2019: Salary $30,000 Dividend income 8,000 Loss on § 1244 small business stock held for three years (45,000) Total itemized deductions (5,000) Determine Janice's net operating loss for 2019.

(Multiple Choice)

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Question 46

In 2019, Tan Corporation incurred the following expenditures in connection with the development of a new product: Salaries \ 60,000 Supplies 20,000 Depreciation on research equipment 10,000 Testing for quality control 5,000 Advertising 8,000 Overhead allocated to research 2,000 Tan began selling the product in November 2019. If Tan elects to amortize research and experimental expenditures, determine its deduction for 2019.

(Essay)

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Question 47

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

(True/False)

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Question 48

Blue Corporation incurred the following expenses in connection with the development of a new product: Salaries \ 100,000 Utilities 18,000 Materials 25,000 Advertising 5,000 Market survey 3,000 Depreciation on machine 9,000 Blue expects to begin selling the product next year. If Blue elects to amortize research and experimental expenditures over 60 months, determine the amount of the deduction for research and experimental expenditures for the current year.

(Multiple Choice)

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Question 49

The amount of loss for partial destruction of business property is the decline in fair market value of the business property.

(True/False)

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Question 50

Jack, age 30 and married with no dependents, is a self-employed individual. For 2019, his self-employed business sustained a net loss from operations of $10,000 from operations . The following additional information was obtained from his personal records for the year: Nonbusiness long-term capital gain \ 2,000 Interest income 6,000 Itemized deductions-consisting of taxes and interest (26,000) Based on this information, what is Jack's net operating loss for 2019 if he and his spouse file a joint return?

(Multiple Choice)

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Question 51

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

(Essay)

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Question 52

Personal casualty gains are allowed to offset personal casualty losses. Currently, if an excess casualty loss results, it is not deductible (unless attributable to a Federally declared disaster).

(True/False)

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Question 53

When a net operating loss is carried forward, it can affect the medical expense deduction of that year.

(True/False)

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Question 54

Stella, age 38, is single with no dependents. The following information was obtained from her personal records for the 2019 year. Salary \ 30,000 Interest income 7,000 Alimony received 12,000 Individual retirement account contribution 2,000 Home mortgage interest expense 4,000 Property taxes 2,000 Personal casual ty loss in a Federal disaster area 38,000 (after the \ 100 floor) Based on this information, what is Stella's net operating loss for 2019? a. $0 b. ($7,200) c. ($8,300) d. ($13,000) e. None of these.

(Essay)

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Question 55

A taxpayer can carry back any NOL incurred for two years and then forward up to 20 years.

(True/False)

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Question 56

Wu, who is single, reports the following items for 2019: Salary \ 25,000 Interest income 8,000 Itemized deductions (\ 27,000 attributable to dedutible casualty loss) (32,000) What is Wu's net operating loss for 2019?

(Multiple Choice)

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Question 57

If the amount of the insurance recovery for a theft of business property is greater than the asset's fair market value (FMV) but less than its adjusted basis, a gain is recognized.

(True/False)

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Question 58

Which of the following events would produce a deductible loss in 2019?

(Multiple Choice)

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Question 59

In 2019, Mary had the following items: Salary \ 30,000 Personal use casualty gain 10,000 Personal use casualty loss (after \ 100 floor) 17,000 Other itemized deductions 4,000 Assuming that Mary files as head of household (has one dependent child), determine her taxable income for 2019.

(Multiple Choice)

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Question 60

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

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

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

Janice, single, reports the following items for 2019: Salary $30,000 Dividend income 8,000 Loss on § 1244 small business stock held for three years (45,000) Total itemized deductions (5,000) Determine Janice's net operating loss for 2019.

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

The amount of loss for partial destruction of business property is the decline in fair market value of the business property.

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

Personal casualty gains are allowed to offset personal casualty losses. Currently, if an excess casualty loss results, it is not deductible (unless attributable to a Federally declared disaster).

When a net operating loss is carried forward, it can affect the medical expense deduction of that year.

A taxpayer can carry back any NOL incurred for two years and then forward up to 20 years.

Wu, who is single, reports the following items for 2019: Salary \ 25,000 Interest income 8,000 Itemized deductions (\ 27,000 attributable to dedutible casualty loss) (32,000) What is Wu's net operating loss for 2019?

If the amount of the insurance recovery for a theft of business property is greater than the asset's fair market value (FMV) but less than its adjusted basis, a gain is recognized.

Which of the following events would produce a deductible loss in 2019?

In 2019, Mary had the following items: Salary \ 30,000 Personal use casualty gain 10,000 Personal use casualty loss (after \ 100 floor) 17,000 Other itemized deductions 4,000 Assuming that Mary files as head of household (has one dependent child), determine her taxable income for 2019.

Understanding and Working With the Federal Tax Law

Working With the Tax Law

Computing the Tax

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

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges

Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions

Taxing Business Income

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

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