Question 1

A net operating loss can be carried back three years or carried forward five years.

Accepted Answer

A) True 
 B)False

Question 2

Brandon,a single taxpayer,had a loss of $48,000 from a rental real estate activity in which he actively participated.He also had $27,000 of income from another rental real estate activity in which he actively participated.He acquired both investments in the current year.If Brandon has no other passive income or losses and has adjusted gross income of $84,000 before considering passive activities,how much loss from rental activities can he use to offset his nonpassive income?

Accepted Answer

A)  $21,000 
B)  $24,000 
C)  $25,000 
D)  $45,000 
A)  $21,000 
B)  $24,000 
C)  $25,000 
D)  $45,000

Question 3

Individual taxpayers can offset portfolio income with passive losses.

Accepted Answer

A) True 
 B)False

Question 4

One of the requirements which must be met for stock to be considered Section 1244 stock is that the stock must be owned by an individual or a partnership.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

The amount realized by Matt on the sale of property to Caitlin includes all of the following with the exception of

Accepted Answer

A)  cash received by Matt. 
B)  mortgage on the property that is assumed by Caitlin. 
C)  mortgage on the property paid off by Matt prior to the sale. 
D)  the FMV of any other property received by Matt in the transaction. 
A)  cash received by Matt. 
B)  mortgage on the property that is assumed by Caitlin. 
C)  mortgage on the property paid off by Matt prior to the sale. 
D)  the FMV of any other property received by Matt in the transaction.

Question 7

Individuals who actively participate in the management of rental real property may deduct up to $25,000 in losses,subject to AGI limitations.

Accepted Answer

A) True 
 B)False

Question 8

Myriah earns salary of $80,000 and $20,000 of dividend income from her stock portfolio this year.Myriah owns a passive activity from which she incurs a $10,000 loss.In addition,the passive activity has generated tax credits this year,and Myriah's share is $5,000.What portion of the $5,000 of tax credits can Myriah apply against her tax liability this year?

Accepted Answer

A)  $0 
B)  $1,000 
C)  $2,000 
D)  $5,000 
A)  $0 
B)  $1,000 
C)  $2,000 
D)  $5,000

Question 9

If a loan has been made to a related party,what are some considerations for determining whether the loan is a bona fide debt or is,in fact,merely a gift?

Accepted Answer

Consider whether there is a written inst

Question 10

Nancy reports the following income and loss in the current year.
 
All three activities are passive activities with respect to Nancy.Nancy also has $21,000 of suspended losses attributable to activity C carried over from prior years.During the year,Nancy sells activity C and realizes a $15,000 taxable gain.What is Nancy's AGI as a result of these transactions?

Accepted Answer

A)  $50,000 
B)  $55,000 
C)  $64,000 
D)  $71,000 
A)  $50,000 
B)  $55,000 
C)  $64,000 
D)  $71,000

Question 11

Atkon Corporation acquired 90% of the stock of Beta Corporation three years ago.Both corporations are located in the United States.Beta has been an energy drink producer,but unfortunately has suffered substantial losses due to government fines and lawsuits.All of its revenues had been from the sales of the energy drinks.Beta has now filed for bankruptcy and is closing the business with no assets remaining for shareholders.Atkon Corporation will recognize

Accepted Answer

A)  a long-term capital loss. 
B)  a short-term capital loss. 
C)  an ordinary loss. 
D)  no gain or loss. 
A)  a long-term capital loss. 
B)  a short-term capital loss. 
C)  an ordinary loss. 
D)  no gain or loss.

Question 12

All of the following losses are deductible except

Accepted Answer

A)  decline in value of securities. 
B)  total worthlessness of securities. 
C)  abandonment of business property. 
D)  destruction of personal-use property by fire, storm, or casualty. 
A)  decline in value of securities. 
B)  total worthlessness of securities. 
C)  abandonment of business property. 
D)  destruction of personal-use property by fire, storm, or casualty.

Question 13

A loss on business or investment property which is abandoned is deductible as an ordinary loss to the extent of the property's adjusted basis on the date of abandonment.

Accepted Answer

A) True 
 B)False

Question 14

For a bad debt to be deductible,the taxpayer must have a basis in the debt.

Accepted Answer

A) True 
 B)False

Question 15

Leonard owns a hotel which was damaged by a hurricane.The hotel had an adjusted basis of $1,000,000 before the hurricane.A recent appraisal determined that the hotel's FMV was $1,500,000 before the hurricane and $700,000 afterwards.Leonard received insurance proceeds of $500,000.His AGI is $60,000.What is the amount of his deductible casualty loss?

Accepted Answer

A)  $293,900 
B)  $300,000 
C)  $793,900 
D)  $800,000 
A)  $293,900 
B)  $300,000 
C)  $793,900 
D)  $800,000

Question 16

Aretha has AGI of less than $100,000 and a 25% marginal tax rate.During the year,she reports a $36,000 loss from Activity A and a $24,000 loss from Activity B.Additionally,Activity A generates $8,000 of tax credits.Both activities A and B are passive real estate rental activities in which Anita actively participates and owns over 10% of each activity.
a.How much loss can be recognized from each activity?
b.What is the amount of Aretha's suspended loss from each activity?
c.How much of the tax credits can be applied this year?

Accepted Answer

a.There are losses from each activity,to

Question 17

How is a claim for refund of taxes filed by an individual who carries an NOL deduction back to a prior year?

Accepted Answer

A claim for refund of taxes is filed by

Question 18

An individual taxpayer has negative taxable income for the year.In calculating the net operating loss created,which of the following expenses or losses will be added back to the negative taxable income?

Accepted Answer

A)  capital losses 
B)  personal and dependency exemptions 
C)  nonbusiness deductions in excess of nonbusiness income 
D)  all of the above 
A)  capital losses 
B)  personal and dependency exemptions 
C)  nonbusiness deductions in excess of nonbusiness income 
D)  all of the above

Question 19

A fire totally destroyed office equipment and furniture which Monica uses in her business.The equipment had an adjusted basis of $15,000 and a FMV of $10,000 before the fire.The furniture's adjusted basis was $5,000 and its FMV was $2,000 before the fire.Monica's AGI for the year is $60,000.Monica does not have insurance on the destroyed assets.How much is Monica's deductible casualty loss?

Accepted Answer

A)  $5,900 
B)  $12,000 
C)  $13,900 
D)  $20,000 
A)  $5,900 
B)  $12,000 
C)  $13,900 
D)  $20,000

Question 20

Daniel's cabin was destroyed in a massive tornado in 2017.After consideration of insurance,he has a loss of $15,000.The President of the United States has declared the area a disaster area.Daniel can deduct this loss in

Accepted Answer

A)  2016. 
B)  2017. 
C)  2018. 
D)  either 2016 or 2017. 
A)  2016. 
B)  2017. 
C)  2018. 
D)  either 2016 or 2017.

A net operating loss can be carried back three years or carried forward five years.

Individual taxpayers can offset portfolio income with passive losses.

One of the requirements which must be met for stock to be considered Section 1244 stock is that the stock must be owned by an individual or a partnership.

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

The amount realized by Matt on the sale of property to Caitlin includes all of the following with the exception of

Individuals who actively participate in the management of rental real property may deduct up to $25,000 in losses,subject to AGI limitations.

If a loan has been made to a related party,what are some considerations for determining whether the loan is a bona fide debt or is,in fact,merely a gift?

All of the following losses are deductible except

A loss on business or investment property which is abandoned is deductible as an ordinary loss to the extent of the property's adjusted basis on the date of abandonment.

For a bad debt to be deductible,the taxpayer must have a basis in the debt.

How is a claim for refund of taxes filed by an individual who carries an NOL deduction back to a prior year?

An individual taxpayer has negative taxable income for the year.In calculating the net operating loss created,which of the following expenses or losses will be added back to the negative taxable income?

Daniel's cabin was destroyed in a massive tornado in 2017.After consideration of insurance,he has a loss of $15,000.The President of the United States has declared the area a disaster area.Daniel can deduct this loss in

An Introduction to Taxation

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Property Transactions: Capital Gains and Losses

Deductions and Losses

Itemized Deductions

Employee Expenses and Deferred Compensation

Depreciation, cost Recovery, amortization, and Depletion

Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

Property Transactions: Sec1231 and Recapture

Special Tax Computation Methods, tax Credits, and Payment of Tax

Tax Research

Corporations

Partnerships and S Corporations

Taxes and Investment Planning

Filters

Exam 8: Losses and Bad Debts

A net operating loss can be carried back three years or carried forward five years.

Individual taxpayers can offset portfolio income with passive losses.

One of the requirements which must be met for stock to be considered Section 1244 stock is that the stock must be owned by an individual or a partnership.

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

The amount realized by Matt on the sale of property to Caitlin includes all of the following with the exception of

Individuals who actively participate in the management of rental real property may deduct up to $25,000 in losses,subject to AGI limitations.

If a loan has been made to a related party,what are some considerations for determining whether the loan is a bona fide debt or is,in fact,merely a gift?

All of the following losses are deductible except

A loss on business or investment property which is abandoned is deductible as an ordinary loss to the extent of the property's adjusted basis on the date of abandonment.

For a bad debt to be deductible,the taxpayer must have a basis in the debt.

How is a claim for refund of taxes filed by an individual who carries an NOL deduction back to a prior year?

An individual taxpayer has negative taxable income for the year.In calculating the net operating loss created,which of the following expenses or losses will be added back to the negative taxable income?

Daniel's cabin was destroyed in a massive tornado in 2017.After consideration of insurance,he has a loss of $15,000.The President of the United States has declared the area a disaster area.Daniel can deduct this loss in

An Introduction to Taxation

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Property Transactions: Capital Gains and Losses

Deductions and Losses

Itemized Deductions

Employee Expenses and Deferred Compensation

Depreciation, cost Recovery, amortization, and Depletion

Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

Property Transactions: Sec1231 and Recapture

Special Tax Computation Methods, tax Credits, and Payment of Tax

Tax Research

Corporations

Partnerships and S Corporations

Taxes and Investment Planning

Filters