Exam 24: Losses and Bad Debts

Lucia owns 100 shares of Cronco Inc.which she purchased on December 1 of last year for $10,000.The stock is not Sec.1244 stock.On July 1 of the current year,Lucia receives notice from the bankruptcy court that Cronco Inc.has been liquidated,and there are no assets remaining for shareholders.As a result,Lucia will have

This summer,Rick's home (which has a basis of $80,000)is damaged by a tornado.An appraisal by a realtor placed the FMV of the home at $120,000 before the tornado and at $85,000 after the tornado.Rick estimates that the insurance company will reimburse him for 60% of the loss.Next year,the insurance company pays Rick $20,000.Rick's current year's AGI is $50,000 and his next year's AGI is $55,000.Rick suffers no other casualty losses in either year.After limitations,Rick may deduct a casualty loss this year of

Which of the following expenses or losses could create a net operating loss for an individual taxpayer?

In February 2017,Amelia's home,which originally cost $150,000,is damaged by a windstorm.Amelia had refinanced the home shortly before the storm,and it was appraised at $200,000.After the storm,the home appraised at $120,000.Amelia has received no insurance reimbursement by December 31,but expects to recover 90 percent of the loss.In the subsequent year,the insurance company pays Amelia $50,000.Amelia's AGI is $85,000 in 2017,and her 2018 AGI is $80,000.Amelia suffers no other casualty losses in either year.Amelia may deduct

An individual taxpayer misses the deadline for filing for a quick refund (Form 1045)for an NOL carryback claim.The taxpayer has lost the opportunity to obtain a refund.

If an NOL is incurred,when would a taxpayer elect to forgo the carryback period and only carry the loss deduction forward?

Tom and Shawn own all of the outstanding stock of Brady Corporation (a retail store operated as a C corporation).This year,Brady generates taxable income of $20,000 from active business operations,and also reports investment interest of $22,000 and losses of $28,000 from a passive activity.As a result,Brady Corporation reports

Jeff owned one passive activity.Jeff sold the activity and realized a $2,000 gain on the sale.Prior to the sale,he realized a current year loss from the activity of $6,000.In addition,he has suspended losses from prior years of $7,000.What is the net impact on Jeff's AGI this year due to the passive activity?

The amount of loss realized on the sale of property is computed by subtracting adjusted basis from amount realized.

What is or are the standards that must be present to warrant a casualty loss deduction?

If a taxpayer disposes of an interest in a passive activity,unused carryover losses are available to the purchaser of the interest.

Joy reports the following income and loss: Activities A,B,and C are all passive activities. Based on this information,Joy has

Material participation by a taxpayer in a passive activity is satisfied if the individual participates in the activity for more than 500 hours during the year.

Shaunda has AGI of $90,000 and owns rental property generating a $27,000 loss.She actively manages the property.Her deductible loss is

A taxpayer uses an allowance method (i.e.aging method)of calculating bad debt expense for purposes of the business' financial statements.For income tax purposes,she will also use the allowance method to calculate the bad debt deduction.

What are some factors which indicate that a debt may be worthless?

A taxpayer's rental activities will be considered a trade or business,rather than a passive activity,if

Mara owns an activity with suspended passive losses from prior years of $13,000.In the current year,Mara becomes a material participant in the activity.This year the activity generates $6,000 of income.The net effect of this activity on Mara's current year AGI is

Losses incurred in the sale or exchange of personal-use property are deductible as capital losses.

The total worthlessness of a security generally results in an ordinary loss.