Question 1

A theft loss is deducted in the year in which the theft is discovered.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

The sale of inventory at a loss results in an ordinary loss.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

The taxpayer should elect to forgo carry

Question 5

Juan has a casualty loss of $32,500 on investment property after receiving an insurance settlement.This is Juan's only casualty transaction this year.Juan's loss is

Accepted Answer

A)  an ordinary loss. 
B)  a capital loss. 
C)  a Sec. 1231 loss. 
D)  a Sec. 1244 loss. 
A)  an ordinary loss. 
B)  a capital loss. 
C)  a Sec. 1231 loss. 
D)  a Sec. 1244 loss.

Question 6

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

Accepted Answer

A)  a short-term capital loss of $10,000. 
B)  a long-term capital loss of $10,000. 
C)  an ordinary loss of $10,000. 
D)  no loss allowed. 
A)  a short-term capital loss of $10,000. 
B)  a long-term capital loss of $10,000. 
C)  an ordinary loss of $10,000. 
D)  no loss allowed.

Question 7

Hope sustained a $3,600 casualty loss due to a severe storm.She also incurred a $800 loss from a theft in the same year.Both the casualty and theft involved personal-use property.Hope's AGI for the year is $25,000 and she does not have insurance coverage.Hope's deductible casualty loss is

Accepted Answer

A)  $1,700. 
B)  $1,800. 
C)  $4,200. 
D)  $4,300. 
A)  $1,700. 
B)  $1,800. 
C)  $4,200. 
D)  $4,300.

Question 8

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

Accepted Answer

A)  adjusted gross income of $90,000. 
B)  salary of $120,000 and deductible net losses of $30,000. 
C)  salary of $120,000 and net passive losses of $30,000 that will be carried over. 
D)  salary of $120,000, passive income of $60,000, and passive loss carryovers of $90,000. 
A)  adjusted gross income of $90,000. 
B)  salary of $120,000 and deductible net losses of $30,000. 
C)  salary of $120,000 and net passive losses of $30,000 that will be carried over. 
D)  salary of $120,000, passive income of $60,000, and passive loss carryovers of $90,000.

Question 9

If a taxpayer suffers a loss attributable to a disaster in an area subsequently declared a disaster area,the casualty loss may be deducted in the year preceding the year in which the loss actually occurs.

Accepted Answer

A) True 
 B)False

Question 10

Justin has AGI of $110,000 before considering his $30,000 loss from rental property,which he actively manages.How much of the rental loss can Justin deduct this year?

Accepted Answer

A)  $10,000 
B)  $20,000 
C)  $25,000 
D)  $30,000 
A)  $10,000 
B)  $20,000 
C)  $25,000 
D)  $30,000

Question 11

Lisa loans her friend,Grace,$10,000 to finance a new business.If Grace defaults on the loan,Lisa may take a deduction for a business bad debt in the year of total worthlessness.

Accepted Answer

A) True 
 B)False

Question 12

Jorge owns activity X which produced a $20,000 passive loss last year.Jorge's only income last year was wages of $30,000.Jorge is a material participant in activity X this year when it produces a $14,000 loss.This year,Jorge's wages are $40,000.This year,Jorge also has passive activity income from activity Y of $16,000.What is the total passive activity loss carryover to next year?

Accepted Answer

A)  $0 
B)  $3,000 
C)  $4,000 
D)  $18,000 
A)  $0 
B)  $3,000 
C)  $4,000 
D)  $18,000

Question 13

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

Accepted Answer

1.The loss must aris

Question 14

Businesses can recognize a loss on abandoned property.What types of factors would indicate that property had been abandoned?

Accepted Answer

1.The property has become wort

Question 15

A bona fide debtor-creditor relationship can never exist in the case of related parties.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A)  $0. 
B)  $13,500. 
C)  $25,000. 
D)  $27,000. 
A)  $0. 
B)  $13,500. 
C)  $25,000. 
D)  $27,000.

Question 17

Why was Section 1244 enacted by Congress? Specifically,consider and discuss some of the individual qualifying requirements of Sec.1244.

Accepted Answer

Sec.1244 was enacted in order to encoura

Question 18

A flood damaged an auto owned by Mr.and Mrs.South on June 15 of this year.The car was only used for personal purposes.
 
Based on these facts,what is the amount of the South's casualty loss deduction after limitations for this year?

Accepted Answer

A)  $900 
B)  $1,000 
C)  $4,400 
D)  $4,500 
A)  $900 
B)  $1,000 
C)  $4,400 
D)  $4,500

Question 19

Vera has a key supplier for her business who was facing cash flow problems which would impair Vera's ability to get shipments of key components for her production.Vera made a $10,000 loan to the supplier.Unfortunately the supplier filed for bankruptcy and has gone out of business without repaying Vera.Vera will be able to recognize a loss of

Accepted Answer

A)  $10,000. 
B)  $3,000. 
C)  $7,000. 
D)  0. 
A)  $10,000. 
B)  $3,000. 
C)  $7,000. 
D)  0.

Question 20

A taxpayer may deduct a loss resulting from the theft of business and investment property but not a theft of personal-use property.

Accepted Answer

A) True 
 B)False

A theft loss is deducted in the year in which the theft is discovered.

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

The sale of inventory at a loss results in an ordinary loss.

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

Juan has a casualty loss of $32,500 on investment property after receiving an insurance settlement.This is Juan's only casualty transaction this year.Juan's loss is

Hope sustained a $3,600 casualty loss due to a severe storm.She also incurred a $800 loss from a theft in the same year.Both the casualty and theft involved personal-use property.Hope's AGI for the year is $25,000 and she does not have insurance coverage.Hope's deductible casualty loss is

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

If a taxpayer suffers a loss attributable to a disaster in an area subsequently declared a disaster area,the casualty loss may be deducted in the year preceding the year in which the loss actually occurs.

Justin has AGI of $110,000 before considering his $30,000 loss from rental property,which he actively manages.How much of the rental loss can Justin deduct this year?

Lisa loans her friend,Grace,$10,000 to finance a new business.If Grace defaults on the loan,Lisa may take a deduction for a business bad debt in the year of total worthlessness.

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

Businesses can recognize a loss on abandoned property.What types of factors would indicate that property had been abandoned?

A bona fide debtor-creditor relationship can never exist in the case of related parties.

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

Why was Section 1244 enacted by Congress? Specifically,consider and discuss some of the individual qualifying requirements of Sec.1244.

A flood damaged an auto owned by Mr.and Mrs.South on June 15 of this year.The car was only used for personal purposes. Based on these facts,what is the amount of the South's casualty loss deduction after limitations for this year?

A taxpayer may deduct a loss resulting from the theft of business and investment property but not a theft of personal-use property.

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 theft loss is deducted in the year in which the theft is discovered.

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

The sale of inventory at a loss results in an ordinary loss.

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

Juan has a casualty loss of $32,500 on investment property after receiving an insurance settlement.This is Juan's only casualty transaction this year.Juan's loss is

Hope sustained a $3,600 casualty loss due to a severe storm.She also incurred a $800 loss from a theft in the same year.Both the casualty and theft involved personal-use property.Hope's AGI for the year is $25,000 and she does not have insurance coverage.Hope's deductible casualty loss is

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

If a taxpayer suffers a loss attributable to a disaster in an area subsequently declared a disaster area,the casualty loss may be deducted in the year preceding the year in which the loss actually occurs.

Justin has AGI of $110,000 before considering his $30,000 loss from rental property,which he actively manages.How much of the rental loss can Justin deduct this year?

Lisa loans her friend,Grace,$10,000 to finance a new business.If Grace defaults on the loan,Lisa may take a deduction for a business bad debt in the year of total worthlessness.

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

Businesses can recognize a loss on abandoned property.What types of factors would indicate that property had been abandoned?

A bona fide debtor-creditor relationship can never exist in the case of related parties.

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

Why was Section 1244 enacted by Congress? Specifically,consider and discuss some of the individual qualifying requirements of Sec.1244.

A flood damaged an auto owned by Mr.and Mrs.South on June 15 of this year.The car was only used for personal purposes. Based on these facts,what is the amount of the South's casualty loss deduction after limitations for this year?

A taxpayer may deduct a loss resulting from the theft of business and investment property but not a theft of personal-use property.

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