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

In 2012, Theo, an employee, had a salary of $30,000 and experienced the following losses: Determine the amount of Theo's itemized deduction from these losses.

In 2011, Tan Corporation incurred the following expenditures in connection with the development of a new product: Tan began selling the product in November, 2011. If Tax elects to amortize research and experimental expenditures, determine Tan's deduction for 2012.

In 2012, Grant's personal residence was damaged by fire.Grant was insured for 90% of his actual loss, and he received the insurance settlement.Grant had adjusted gross income, before considering the casualty item, of $30,000.Pertinent data with respect to the residence follows: What is Grant's allowable casualty loss deduction?

A loss from a worthless security is always treated as a short-term capital loss.

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

The amount of a loss on insured business use property is reduced by the insurance coverage if no claim is made against the insurer.

Taxpayer's home was destroyed by a storm in the current year and the area was declared a disaster area. If the taxpayer elects to treat the loss as having occurred in the prior year, it will be subject to the 10%-of-AGI reduction based on the AGI of the current year.

In 2011, Robin Corporation incurred the following expenditures in connection with the development of a new product: In 2012, Robin incurred the following additional expenditures in connection with the development of the product: In October 2012, Robin began receiving benefits from the project.If Robin elects to expense research and experimental expenditures, determine the amount and year of the deduction.

Bruce, who is single, had the following items for the current year: Determine Bruce's AGI for the current year.

Which of the following events would produce a deductible loss?

Why was the domestic production activities deduction (DPAD) enacted by Congress?

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

Susan has the following items for 2012: · Loss on rental property caused by termites-$150,000. Insurance covered 80% of the loss. · Loss on personal use automobile-$10,000. The insurance policy does not cover the first $3,000 of loss. Susan decided not to file a claim for the loss. · Loss on a painting stolen from Susan's house. Susan purchased the painting three years ago as an investment. She paid $40,000 for the painting and it was worth $45,000 at the time of the theft. The painting was insured for the fair market value. · Salary-$40,000.

An NOL carryforward is not used in determining the current year's NOL.

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

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

Last year, Lucy purchased a $100,000 account receivable for $90,000.During the current year, Lucy collected $97,000 on the account.What are the tax consequences to Lucy associated with the collection of the account receivable? No subsequent collections are expected.

Gary, who is an employee of Red Corporation, has the following items for 2012: Determine Gary's AGI and total amount of itemized deductions for 2012.

Identify the factors that should be considered in determining whether a transaction is a bona fide loan or a gift.

"Other casualty" means casualties similar to those associated with fires, storms, or shipwrecks.