Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

A nonbusiness bad debt can offset an unlimited amount of long-term capital gain.

Accepted Answer

A) True 
 B)False

Question 3

Nonbusiness income for net operating loss purposes includes dividends received.

Accepted Answer

A) True 
 B)False

Question 4

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?

Accepted Answer

A) $1,200 
B) $1,800 
C) $2,400 
D) $3,600 
E) None of the above 
A) $1,200 
B) $1,800 
C) $2,400 
D) $3,600 
E) None of the above

Question 5

Losses on rental property are classified as deductions for AGI.

Accepted Answer

A) True 
 B)False

Question 6

In 2015,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 2016,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 2016.

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 7

Khalid,who is single,had the following items for 2016:
Salary
$40,000
Interest income on U.S.Treasury bonds
8,000
Loss on theft of securities
(60,000)
Interest income on New York state bonds
12,000
​
What is Khalid's NOL for 2016?

Accepted Answer

A) ($10,000) 
B) ($12,000) 
C) ($16,100) 
D) ($24,050) 
E) None of the above 
A) ($10,000) 
B) ($12,000) 
C) ($16,100) 
D) ($24,050) 
E) None of the above

Question 8

Discuss the treatment of alimony paid and deductible individual retirement account contributions in computing an individual's net operating loss.

Accepted Answer

Alimony paid and deductible individual r

Question 9

In determining whether a debt is a business or nonbusiness bad debt,the debtor's use of the borrowed funds is important.

Accepted Answer

A) True 
 B)False

Question 10

The excess of nonbusiness capital gains over nonbusiness capital losses must be added to taxable income to compute the net operating loss of an individual.

Accepted Answer

A) True 
 B)False

Question 11

The domestic production activities deduction (DPAD)for a sole proprietor is calculated by multiplying a percentage rate (currently 9%)times adjusted gross income.

Accepted Answer

A) True 
 B)False

Question 12

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.

Accepted Answer

Salary
 $45,000
 Income under tax benefi

Question 13

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?

Accepted Answer

A) File an amended tax return for last year. 
B) Report no income for the current year. 
C) Report $8,000 of income for the current year. 
D) Report $12,000 of income for the current year. 
E) None of the above. 
A) File an amended tax return for last year. 
B) Report no income for the current year. 
C) Report $8,000 of income for the current year. 
D) Report $12,000 of income for the current year. 
E) None of the above.

Question 14

A loss from a worthless security is always treated as a short-term capital loss.

Accepted Answer

A) True 
 B)False

Question 15

Juan,married and filing jointly,had the following income and deductions for 2016:
Sales
$600,000
Business expenses
(650,000)
Interest income
3,000
Dividends
4,000
Personal casualty loss (after deducting the $100 floor)
(25,000)
Taxes paid on personal residence
(7,000)
Interest paid on personal residence
(9,000)
Alimony paid
(18,000)
​
Juan has three dependent children.Calculate the net operating loss for 2016.

Accepted Answer

Sales
 $600,000
 Business expense
 (650,

Question 16

Jose,single,had the following items for 2016:
Salary
$44,000
§ 1244 loss on stock acquired 3 years ago
(70,000)
§ 1244 gain on stock acquired 10 months ago
26,000
Worthless security purchased in June of last year
(4,000)
Nonbusiness bad debt
(7,000)
Interest income
8,000
Compute Jose's adjusted gross income for 2016.
​

Accepted Answer

Salary
 $44,000
 Ordinary loss from § 12

Question 17

A taxpayer who sustains a casualty loss in an area designated by the President of the United States as a disaster area may take the loss in the year in which the loss occurred or elect to take the loss in the previous year.Identify factors that should be considered in deciding in which year to take the loss.

Accepted Answer

Factors that should be considered includ

Question 18

In 2016,Wally had the following insured personal casualty losses (arising from one casualty).Wally also had $42,000 AGI for the year before considering the casualty.
Fair Market Value
​
Asset
Adjusted Basis
Before
After
Insurance Recovery
A
$9,200
$8,000
$1,000
$2,000
B
3,000
4,000
-0-
4,000
C
3,700
1,700
-0-
900
Wally's casualty loss deduction is:

Accepted Answer

A) $1,500. 
B) $1,600. 
C) $4,800. 
D) $58,000. 
E) None of the above. 
A) $1,500. 
B) $1,600. 
C) $4,800. 
D) $58,000. 
E) None of the above.

Question 19

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

Question 20

If a business debt previously deducted as partially worthless becomes totally worthless this year,only the amount not previously deducted can be deducted this year.

Accepted Answer

A) True 
 B)False

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

A nonbusiness bad debt can offset an unlimited amount of long-term capital gain.

Nonbusiness income for net operating loss purposes includes dividends received.

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?

Losses on rental property are classified as deductions for AGI.

Khalid,who is single,had the following items for 2016: Salary $40,000 Interest income on U.S.Treasury bonds 8,000 Loss on theft of securities (60,000) Interest income on New York state bonds 12,000 What is Khalid's NOL for 2016?

Discuss the treatment of alimony paid and deductible individual retirement account contributions in computing an individual's net operating loss.

In determining whether a debt is a business or nonbusiness bad debt,the debtor's use of the borrowed funds is important.

The excess of nonbusiness capital gains over nonbusiness capital losses must be added to taxable income to compute the net operating loss of an individual.

The domestic production activities deduction (DPAD)for a sole proprietor is calculated by multiplying a percentage rate (currently 9%)times adjusted gross income.

A loss from a worthless security is always treated as a short-term capital loss.

If a business debt previously deducted as partially worthless becomes totally worthless this year,only the amount not previously deducted can be deducted this year.

An Introduction to Taxation and Understanding the Federal 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

Deduction and Losses Certain Itemized Deductions

Investor Losses

Alternative Minimum Tax

Tax Credits and Payment Procedures

Property Transactions Determination of Gain and Loss and Basic Considerations

Property Transactions Nontaxable Exchanges

Property Transactions Capital Gains and Losses

Property Transactions Section 1231 and Recapture Provisions

Accounting Periods and Methods

Deferred Compensation

Corporations and Partnerships

Filters

Exam 7: Deductions and Losses Certain Business Expenses and Losses

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

A nonbusiness bad debt can offset an unlimited amount of long-term capital gain.

Nonbusiness income for net operating loss purposes includes dividends received.

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?

Losses on rental property are classified as deductions for AGI.

Khalid,who is single,had the following items for 2016: Salary $40,000 Interest income on U.S.Treasury bonds 8,000 Loss on theft of securities (60,000) Interest income on New York state bonds 12,000 ​ What is Khalid's NOL for 2016?

Discuss the treatment of alimony paid and deductible individual retirement account contributions in computing an individual's net operating loss.

In determining whether a debt is a business or nonbusiness bad debt,the debtor's use of the borrowed funds is important.

The excess of nonbusiness capital gains over nonbusiness capital losses must be added to taxable income to compute the net operating loss of an individual.

The domestic production activities deduction (DPAD)for a sole proprietor is calculated by multiplying a percentage rate (currently 9%)times adjusted gross income.

A loss from a worthless security is always treated as a short-term capital loss.

If a business debt previously deducted as partially worthless becomes totally worthless this year,only the amount not previously deducted can be deducted this year.

An Introduction to Taxation and Understanding the Federal 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

Deduction and Losses Certain Itemized Deductions

Investor Losses

Alternative Minimum Tax

Tax Credits and Payment Procedures

Property Transactions Determination of Gain and Loss and Basic Considerations

Property Transactions Nontaxable Exchanges

Property Transactions Capital Gains and Losses

Property Transactions Section 1231 and Recapture Provisions

Accounting Periods and Methods

Deferred Compensation

Corporations and Partnerships

Filters

Khalid,who is single,had the following items for 2016: Salary $40,000 Interest income on U.S.Treasury bonds 8,000 Loss on theft of securities (60,000) Interest income on New York state bonds 12,000 What is Khalid's NOL for 2016?