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

Jack, age 30 and married with no dependents, is a self-employed individual. For 2017, his self-employed business sustained a net loss from operations of $10,000. The following additional information was obtained from his personal records for the year: ​ Based on the above information, what is Jack's net operating loss for 2017 if he and his spouse file a joint return?

An individual taxpayer who does not itemize deductions uses the standard deduction to compute the excess of nonbusiness deductions over the sum of nonbusiness income and net nonbusiness capital gains for purposes of computing net operating loss.

A father cannot claim a loss on his daughter's rental use property.

Jim had a car accident in 2017 in which his car was completely destroyed. At the time of the accident, the car had a fair market value of $30,000 and an adjusted basis of $40,000. Jim used the car 100% of the time for business use. Jim received an insurance recovery of 70% of the value of the car at the time of the accident. If Jim's AGI for the year is $60,000, determine his deductible loss on the car.

The amount of a business loss cannot exceed the amount of the taxpayer's NOL for the taxable year.

A taxpayer can elect to forgo the NOL carryback period of 2 years.

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

A bond held by an investor that is uncollectible will be treated as a worthless security and hence, produce a capital loss.

Ruth, age 66, sustains a net operating loss (NOL) of $15,000 for 2017. Because Ruth had no taxable income in 2015, the loss is carried back to 2016. For 2016, the joint income tax return of Ruth and her husband was as follows:

When a nonbusiness casualty loss is spread between two taxable years, the loss in the second year is reduced by 10% of adjusted gross income for the first year.

If investment property is stolen, the amount of the loss is the adjusted basis of the property at the time of the theft reduced by $100 and 10% of AGI.

Jose, single, had the following items for 2017: ​

Maria, who is single, had the following items for 2017: Determine Maria's adjusted gross income for 2017.

In 2017, Morley, a single taxpayer, had an AGI of $30,000 before considering the following items: ​ Determine the amount of Morley's itemized deduction from the losses.

An NOL carryforward is used in determining the current year's charitable contribution deduction.

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.

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?

A reimbursed employee business expense cannot create an NOL for 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.

Last year, Green Corporation incurred the following expenditures in the development of a new plant process: ​ During the current year, benefits from the project began being realized in May. If Green Corporation elects a 60 month deferral and amortization period, determine the amount of the deduction for the current year.