Question 1

Losses on rental property are classified as deductions from AGI (itemized deductions).

Accepted Answer

A) True 
 B)False  False

Question 2

Taxpayers must sell or exchange their § 1244 stock in order to recognize an ordinary loss (does not apply to stock becoming worthless).

Accepted Answer

A) True 
 B)False  False

Question 3

The amount of loss for partial destruction of business property is the decline in fair market value of the business property.

Accepted Answer

A) True 
 B)False  False

Question 4

On February 20, 2011, Bill purchased stock in Pink Corporation (the stock is not small business stock) for $1,000.On May 1, 2012, the stock became worthless.During 2012, Bill also had an $8,000 loss on § 1244 small business stock purchased two years ago, a $9,000 loss on a nonbusiness bad debt, and a $5,000 long-term capital gain.How should Bill treat these items on his 2012 tax return?

Accepted Answer

A) $4,000 long-term capital loss and $9,000 short-term capital loss. 
B) $4,000 long-term capital loss and $3,000 short-term capital loss. 
C) $8,000 ordinary loss and $3,000 short-term capital loss. 
D) $8,000 ordinary loss and $5,000 short-term capital loss. 
E) $8,000 long-term capital loss and $6,000 short-term capital loss. 
A) $4,000 long-term capital loss and $9,000 short-term capital loss. 
B) $4,000 long-term capital loss and $3,000 short-term capital loss. 
C) $8,000 ordinary loss and $3,000 short-term capital loss. 
D) $8,000 ordinary loss and $5,000 short-term capital loss. 
E) $8,000 long-term capital loss and $6,000 short-term capital loss.

Question 5

Norm's car, which he uses 100% for personal purposes, was completely destroyed in an accident in 2012.The car's adjusted basis at the time of the accident was $13,000.Its fair market value was $10,000.The car was covered by a $2,000 deductible insurance policy.Norm did not file a claim against the insurance policy because of a fear that reporting the accident would result in a substantial increase in his insurance rates.His adjusted gross income was $14,000 (before considering the loss).What is Norm's deductible loss?

Accepted Answer

A) $0. 
B) $100. 
C) $500. 
D) $9,500. 
E) None of the above. 
A) $0. 
B) $100. 
C) $500. 
D) $9,500. 
E) None of the above.

Question 6

On July 20, 2010, Matt (who files a joint return) purchased 3,000 shares of Orange Corporation stock (the stock is § 1244 small business stock) for $24,000. On November 10, 2011, Matt purchased an additional 1,000 shares of Orange Corporation stock from a friend for $150,000. On September 15, 2012, Matt sold the 4,000 shares of stock for $120,000. How should Matt treat the sale of the stock on his 2012 return?

Accepted Answer

A) $54,000 ordinary loss. 
B) $100,000 ordinary loss; $46,000 net capital gain. 
C) $100,000 ordinary loss; $20,000 STCL. 
D) $130,000 ordinary loss; $66,000 LTCG. 
E) None of the above. 
A) $54,000 ordinary loss. 
B) $100,000 ordinary loss; $46,000 net capital gain. 
C) $100,000 ordinary loss; $20,000 STCL. 
D) $130,000 ordinary loss; $66,000 LTCG. 
E) None of the above.

Question 7

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.

Accepted Answer

A) $48,000. 
B) $50,400. 
C) $54,667. 
D) $57,067. 
E) None of the above. 
A) $48,000. 
B) $50,400. 
C) $54,667. 
D) $57,067. 
E) None of the above.

Question 8

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.

Accepted Answer

A) True 
 B)False

Question 9

On June 2, 2011, Fred's TV Sales sold Mark a large HD TV, on account, for $12,000. Fred's TV Sales uses the accrual method. In 2012, 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 2013, final settlement was made and Fred received $1,000. How much bad debt loss can Fred deduct in 2013?

Accepted Answer

A) $0. 
B) $7,000. 
C) $8,000. 
D) $12,000. 
E) None of the above. 
A) $0. 
B) $7,000. 
C) $8,000. 
D) $12,000. 
E) None of the above.

Question 10

On September 3, 2011, Able, a single individual, purchased § 1244 stock in Red Corporation from his friend Al for $60,000.On December 31, 2011, the stock was worth $85,000.On August 15, 2012, Able was notified that the stock was worthless.How should Able report this item on his 2012 tax return?

Accepted Answer

A) $85,000 capital loss. 
B) $85,000 ordinary loss. 
C) $50,000 ordinary loss and $35,000 capital loss. 
D) $60,000 ordinary loss. 
E) None of the above. 
A) $85,000 capital loss. 
B) $85,000 ordinary loss. 
C) $50,000 ordinary loss and $35,000 capital loss. 
D) $60,000 ordinary loss. 
E) None of the above.

Question 11

Two years ago, Gina loaned Tom $50,000. Tom signed a note the terms of which called for monthly payments of $2,000 plus 6% interest on the outstanding balance. Last year, when the balance owing on the loan was $18,000, Tom defaulted on the note. As of the end of last year, there appeared to be no reasonable prospect of Gina recovering the $18,000. As a consequence, Gina claimed the $18,000 as a nonbusiness bad debt. Last year, Gina had AGI of a negative $6,000 which included $5,000 net long-term capital gains and $4,000 of qualified dividends. Gina did not itemize her deductions. During the current year, Tom paid Gina $13,000 in final settlement of the loan. How should Gina account for the payment in the current year?

Accepted Answer

A) File an amended tax return for last year. 
B) Report no income for the current year. 
C) Report $8,000 of income for the current year. 
D) Report $12,000 of income for the current year. 
E) None of the above. 
A) File an amended tax return for last year. 
B) Report no income for the current year. 
C) Report $8,000 of income for the current year. 
D) Report $12,000 of income for the current year. 
E) None of the above.

Question 12

Jed is an electrician. Jed and his wife are accrual basis taxpayers and file a joint return. Jed wired a new house for Alison and billed her $15,000. Alison paid Jed $10,000 and refused to pay the remainder of the bill, claiming the fee to be exorbitant. Jed took Alison to Small Claims Court for the unpaid amount and was awarded a $2,000 judgement. Jed was never able to collect the judgement nor the remainder of the bill from Alison. What amount of loss may Jed deduct in the current year?

Accepted Answer

A) $0. 
B) $2,000. 
C) $3,000. 
D) $5,000. 
E) None of the above. 
A) $0. 
B) $2,000. 
C) $3,000. 
D) $5,000. 
E) None of the above.

Question 13

Tonya had the following items for last year:
   For the current year, Tonya had the following items:
   Determine Tonya's adjusted gross income for the current year.

Accepted Answer

The answer of Tonya had the following items for last...

Question 14

A personal casualty loss deduction may be allowed for losses resulting from termites.

Accepted Answer

A) True 
 B)False

Question 15

For the year 2012, Amber Corporation has taxable income of $880,000, alternative minimum taxable income of $600,000, and qualified production activities income (QPAI) of $640,000. The total W-2 wages paid to employees engaged in qualified domestic production activities are $116,000. Amber's DPAD for 2012 is:

Accepted Answer

A) $54,000. 
B) $57,600. 
C) $58,000. 
D) $79,200. 
E) None of the above. 
A) $54,000. 
B) $57,600. 
C) $58,000. 
D) $79,200. 
E) None of the above.

Question 16

Alicia was involved in an automobile accident in 2012.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.

Accepted Answer

A) $4,500. 
B) $6,100. 
C) $8,000. 
D) $24,000. 
E) None of the above. 
A) $4,500. 
B) $6,100. 
C) $8,000. 
D) $24,000. 
E) None of the above.

Question 17

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 18

Red Corporation incurred a $15,000 bad debt last year. Red Corporation also had an $9,000 long-term capital gain last year. Red's taxable income for last year was $100,000. During the current year, Red Corporation, unexpectedly, collected $7,000 on the debt. How should Red Corporation account for the $7,000 collection?

Accepted Answer

A) $0 income. 
B) $3,000 income. 
C) $4,000 income. 
D) $7,000 income. 
E) None of the above. 
A) $0 income. 
B) $3,000 income. 
C) $4,000 income. 
D) $7,000 income. 
E) None of the above.

Question 19

Depreciation on a building used for research may be a research and experimental expense.

Accepted Answer

A) True 
 B)False

Question 20

If the amount of the insurance recovery for a theft of business property is greater than the asset's fair market value but less than it's adjusted basis, a gain is recognized.

Accepted Answer

A) True 
 B)False

Losses on rental property are classified as deductions from AGI (itemized deductions).

Taxpayers must sell or exchange their § 1244 stock in order to recognize an ordinary loss (does not apply to stock becoming worthless).

The amount of loss for partial destruction of business property is the decline in fair market value of the business property.

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.

On September 3, 2011, Able, a single individual, purchased § 1244 stock in Red Corporation from his friend Al for $60,000.On December 31, 2011, the stock was worth $85,000.On August 15, 2012, Able was notified that the stock was worthless.How should Able report this item on his 2012 tax return?

Tonya had the following items for last year: For the current year, Tonya had the following items: Determine Tonya's adjusted gross income for the current year.

A personal casualty loss deduction may be allowed for losses resulting from termites.

Depreciation on a building used for research may be a research and experimental expense.

If the amount of the insurance recovery for a theft of business property is greater than the asset's fair market value but less than it's adjusted basis, a gain is recognized.

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

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

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

Losses on rental property are classified as deductions from AGI (itemized deductions).

Taxpayers must sell or exchange their § 1244 stock in order to recognize an ordinary loss (does not apply to stock becoming worthless).

The amount of loss for partial destruction of business property is the decline in fair market value of the business property.

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.

On September 3, 2011, Able, a single individual, purchased § 1244 stock in Red Corporation from his friend Al for $60,000.On December 31, 2011, the stock was worth $85,000.On August 15, 2012, Able was notified that the stock was worthless.How should Able report this item on his 2012 tax return?

Tonya had the following items for last year: For the current year, Tonya had the following items: Determine Tonya's adjusted gross income for the current year.

A personal casualty loss deduction may be allowed for losses resulting from termites.

Depreciation on a building used for research may be a research and experimental expense.

If the amount of the insurance recovery for a theft of business property is greater than the asset's fair market value but less than it's adjusted basis, a gain is recognized.

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

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