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

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.

John files a return as a single taxpayer. In 2017, he had the following items: Determine John's AGI for 2017.

A theft of investment property can create or increase a net operating loss for an individual.

While Susan was on vacation during the current year, someone broke into her home and stole the following items: ​ Susan's adjusted gross income, before considering any of the above items, is $60,000. Determine the total amount of Susan's itemized deductions resulting from the theft.

Julie, who is single, has the following items for 2017: ​

Blue Corporation incurred the following expenses in connection with the development of a new product: Blue expects to begin selling the product next year. If Blue elects to amortize research and experimental expenditures over 60 months, determine the amount of the deduction for research and experimental expenditures for the current year.

Mike, single, age 31, had the following items for 2017: ​ Compute Mike's taxable income for 2017.

Janice, single, had the following items for the year 2017: ​ Determine Janice's net operating loss for the year 2017.

Milt, married and filing jointly, had the following items for 2017: ​ Milt has two dependent children. If Milt and his wife file a joint return, compute their net operating loss for 2017.

Neal, single and age 37, has the following items for 2017: ​ Determine Neal's taxable income for 2017.

On June 2, 2016, Fred's TV Sales sold Mark a large HD TV, on account, for $12,000. Fred's TV Sales uses the accrual method. In 2017, when the balance on the account was $8,000, Mark filed for bankruptcy. Fred was notified that he could not expect to receive any of the amount owed to him. In 2018, final settlement was made and Fred received $1,000. How much bad debt loss can Fred deduct in 2018?

When a net operating loss is carried back to a non-loss year, the net operating loss can affect the medical expense deduction of the carryback year.

Alicia was involved in an automobile accident in 2017. Her car was used 60% for business and 40% for personal use. The car had originally cost $40,000. At the time of the accident, the car was worth $20,000 and Alicia had taken $8,000 of depreciation. The car was totally destroyed and Alicia had let her car insurance expire. If Alicia's AGI is $50,000 (before considering the loss), determine her itemized deduction for the casualty loss.

Discuss the effect of alimony in computing a net operating loss.

A theft loss is taken in the year of the theft.

Nonbusiness income for net operating loss purposes includes dividends received.

The limit for the domestic production activities deduction (DPAD) uses all W-2 wages paid to employees by the taxpayer during the tax year.

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.

Wu, who is single, has the following items for 2017: ​ What is Wu's net operating loss for 2017?

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