Question 1

A loss is not allowed for a security that declines in value.

Accepted Answer

A) True 
 B)False

Question 2

Jim had a car accident in 2012 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 personal 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.

Accepted Answer

A) $900. 
B) $2,900. 
C) $3,000. 
D) $9,000. 
E) None of the above. 
A) $900. 
B) $2,900. 
C) $3,000. 
D) $9,000. 
E) None of the above.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

John had adjusted gross income of $60,000.During the year his personal use summer home was damaged by a fire.Pertinent data with respect to the home follows:   John had an accident with his personal use car.As a result of the accident, John was cited with reckless driving and willful negligence.Pertinent data with respect to the car follows:
  What is John's itemized casualty loss deduction?

Accepted Answer

A) $0. 
B) $2,000. 
C) $17,000. 
D) $18,000. 
E) None of the above. 
A) $0. 
B) $2,000. 
C) $17,000. 
D) $18,000. 
E) None of the above.

Question 5

James is in the business of debt collection. He purchased a $20,000 account receivable from Green Corporation for $15,000. During the year, James collected $17,000 in final settlement of the account. James can take a $2,000 bad debt deduction in the current year.

Accepted Answer

A) True 
 B)False

Question 6

Identify the factors that should be considered in determining whether a transaction is a business bad debt or a nonbusiness bad debt.

Accepted Answer

Factors to be considered in de

Question 7

For tax years beginning in 2012, the domestic production activities deduction (DPAD) for a sole proprietor is calculated by multiplying 9% times adjusted gross income.

Accepted Answer

A) True 
 B)False

Question 8

Juanita, single and age 43, had the following items for 2012:
   Compute Juanita's taxable income for 2012.

Accepted Answer

The answer of Juanita, single and age 43, had the...

Question 9

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

Accepted Answer

limony received is treated as

Question 10

Ivory, Inc., has taxable income of $600,000 and qualified production activities income (QPAI) of $700,000 in 2012.Ivory's domestic production activities deduction is:

Accepted Answer

A) $36,000. 
B) $42,000. 
C) $54,000. 
D) $63,000. 
E) None of the above. 
A) $36,000. 
B) $42,000. 
C) $54,000. 
D) $63,000. 
E) None of the above.

Question 11

In determining whether a debt is a business or nonbusiness bad debt, the debtor's use of the borrowed funds is not important.

Accepted Answer

A) True 
 B)False

Question 12

Al, who is single, has a gain of $40,000 on the sale of §1244 stock (small business stock) and a loss of $80,000 on the sale of § 1244 stock.As a result, Al has a $40,000 ordinary loss.

Accepted Answer

A) True 
 B)False

Question 13

Several years ago, John purchased 2,000 shares of Red Corporation § 1244 stock from Mark for $40,000. Last year, John sold one-half of his Red Corporation stock to Mike for $12,000. During the current year, John sold the remaining Red Corporation stock for $3,000. John has a $17,000 ($3,000 - $20,000) ordinary loss for the current year.

Accepted Answer

A) True 
 B)False

Question 14

In 2012, 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.   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 15

Maria, who is single, had the following items for 2012:
   Determine Maria's adjusted gross income for 2012.

Accepted Answer

The answer of Maria, who is single, had the following...

Question 16

The amount of partial worthlessness on a nonbusiness bad debt is deducted in the year partial worthlessness is determined.

Accepted Answer

A) True 
 B)False

Question 17

A bona fide debt cannot arise on a loan between father and son.

Accepted Answer

A) True 
 B)False

Question 18

If a taxpayer has an NOL in 2012 of $20,000, of which $8,000 is attributable to a theft of rental use property, the taxpayer may:

Accepted Answer

A) Carry all of the NOL of $20,000 back 5 years. 
B) Carry all of the NOL of $20,000 back 3 years. 
C) Carry $8,000 of the NOL back 3 years and the remainder of the NOL of $12,000 back 2 years. 
D) All of the above. 
E) None of the above. 
A) Carry all of the NOL of $20,000 back 5 years. 
B) Carry all of the NOL of $20,000 back 3 years. 
C) Carry $8,000 of the NOL back 3 years and the remainder of the NOL of $12,000 back 2 years. 
D) All of the above. 
E) None of the above.

Question 19

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

Question 20

A taxpayer may carry any NOL incurred back two years.

Accepted Answer

A) True 
 B)False

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

A loss is not allowed for a security that declines in value.

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

James is in the business of debt collection. He purchased a $20,000 account receivable from Green Corporation for $15,000. During the year, James collected $17,000 in final settlement of the account. James can take a $2,000 bad debt deduction in the current year.

Identify the factors that should be considered in determining whether a transaction is a business bad debt or a nonbusiness bad debt.

For tax years beginning in 2012, the domestic production activities deduction (DPAD) for a sole proprietor is calculated by multiplying 9% times adjusted gross income.

Juanita, single and age 43, had the following items for 2012: Compute Juanita's taxable income for 2012.

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

Ivory, Inc., has taxable income of $600,000 and qualified production activities income (QPAI) of $700,000 in 2012.Ivory's domestic production activities deduction is:

In determining whether a debt is a business or nonbusiness bad debt, the debtor's use of the borrowed funds is not important.

Al, who is single, has a gain of $40,000 on the sale of §1244 stock (small business stock) and a loss of $80,000 on the sale of § 1244 stock.As a result, Al has a $40,000 ordinary loss.

In 2012, 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. Wally's casualty loss deduction is:

Maria, who is single, had the following items for 2012: Determine Maria's adjusted gross income for 2012.

The amount of partial worthlessness on a nonbusiness bad debt is deducted in the year partial worthlessness is determined.

A bona fide debt cannot arise on a loan between father and son.

If a taxpayer has an NOL in 2012 of $20,000, of which $8,000 is attributable to a theft of rental use property, the taxpayer may:

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.

A taxpayer may carry any NOL incurred back two years.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Computing the Tax

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

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

A: Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 1

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 2

Property Transactions: Capital Gains and Losses, 1231, Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S: Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

Income Taxation of Trusts and Estates

Filters