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

Cream,Inc.'s taxable income for the current year before any deduction for an NOL carryforward of $30,000 is $70,000.Cream's qualified production activities income (QPAI) is $60,000.What is the amount of Cream's domestic production activities deduction (DPAD) for the current year?

John files a return as a single taxpayer.In 2015,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 2015.

James is in the business of debt collection.He purchased a $20,000 account receivable from Green Corporation for $15,000.During the year,James collected $17,000 in final settlement of the account.James can take a $2,000 bad debt deduction in the current year.

Gary,who is an employee of Red Corporation,has the following items for 2015: Salary $80,000 Personal casualty gain 7,000 Personal casualty loss from one event (before the $100 floor) 15,000 Loss on rental property 6,000 Theft of bearer bonds 18,000 Unreimbursed loss from theft of a computer used 100% for business 4,000 Determine Gary's AGI and total amount of itemized deductions for 2015.

John had adjusted gross income of $60,000.During the year his personal use summer home was damaged by a fire.Pertinent data with respect to the home follows: Cost basis $260,000 Value before the fire 400,000 Value after the fire 100,000 Insurance recovery 270,000 ​ John had an accident with his personal use car.As a result of the accident,John was cited with reckless driving and willful negligence.Pertinent data with respect to the car follows: Cost basis $80,000 Value before the accident 56,000 Value after the accident 20,000 Insurance recovery 18,000 ​ What is John's itemized casualty loss deduction?

The cost of repairs to damaged property is not an acceptable measure of the loss in value of the property.

Susan has the following items for 2015: ∙ Loss on rental property caused by termites-$110,000.Insurance covered 80% of the loss. ∙ Loss on personal use automobile-$10,000.The insurance policy does not cover the first $3,000 of loss.Susan decided not to file a claim for the loss. ∙ Loss on a painting stolen from Susan's house.Susan purchased the painting three years ago as an investment.She paid $40,000 for the painting and it was worth $35,000 at the time of the theft.The painting was insured for the fair market value. ∙ Salary-$40,000. Determine Susan's AGI and total amount of itemized deductions for 2015.

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

A corporation which makes a loan to a shareholder can have a nonbusiness bad debt deduction.

In 2015,Grant's personal residence was completely destroyed by fire.Grant was insured for 100% of his actual loss,and he received the insurance settlement.Grant had adjusted gross income,before considering the casualty item,of $30,000.Pertinent data with respect to the residence follows: Cost basis $280,000 Value before casualty 250,000 Value after casualty -0- What is Grant's allowable casualty loss deduction?

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

Taxpayer's home was destroyed by a storm in the current year and the area was declared a 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 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.

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?

Two years ago,Gina loaned Tom $50,000.Tom signed a note the terms of which called for monthly payments of $2,000 plus 6% interest on the outstanding balance.Last year,when the balance owing on the loan was $18,000,Tom defaulted on the note.As of the end of last year,there appeared to be no reasonable prospect of Gina recovering the $18,000.As a consequence,Gina claimed the $18,000 as a nonbusiness bad debt.Last year,Gina had AGI of a negative $6,000 which included $5,000 net long-term capital gains and $4,000 of qualified dividends.Gina did not itemize her deductions.During the current year,Tom paid Gina $13,000 in final settlement of the loan.How should Gina account for the payment in the current year?

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

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

Discuss the treatment,including the carryback and carryforward periods,of casualty losses incurred with personal use property.

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.

Neal,single and age 37,has the following items for 2015: Salary $50,000 Casualty loss on business property (8,000) Casualty loss on rental property (5,000) Personal casualty gains 3,000 Personal casualty losses (after $100 floor) (12,000) Interest expense on personal residence (7,000) Determine Neal's taxable income for 2015.