Exam 7: Losses-Deductions and Limitations

Kenneth owns all of the stock of Kearney Corporation. Kenneth is also the President of Kearney and works full-time running the corporation. During the current year, Kearney has a loss of $40,000 from its operations. I.If Kearney is an S Corporation, the corporation may carry the loss forward indefinitely. II.If Kearney is a regular corporation, Kenneth may deduct the loss for AGI on his personal tax return because the corporation is a flow through entity. ​

During the current year, Cathy realizes Determine the tax consequences of these events. - a $\$ 3,000$ loss on the sale of her personal use automobile held 4 years. - a $\$ 4,000$ loss on the sale of Itoham Corporation stock held 3 years for investment. - a $\$ 2,000$ gain on the sale of Sterling, Inc., bonds held 7 months for an investment.

During 2018, Pamela worked two "jobs." She performed financial consulting activities for 1,000 hours and real estate development and rental activities for 1,200 hours. Her real estate development and rental activities produced a loss of $35,000. Her financial consulting generated a net business income of $40,000. How much of the loss can Pamela deduct against her financial consulting income?

Melinda and Riley are married taxpayers. During the year, they completed a single capital asset sale in which a loss of $120,000 is realized on the sale ($15,000 amount realized, less $135,000 adjusted basis) of qualified small business stock. How much of the loss can the taxpayers deduct?

Nelson is the owner of an apartment complex. He actively participates in the management of the building. During the current year, it generates a taxable loss of $33,000. Nelson's other sources of income are salary of $148,000 and interest of $12,000. What is Nelson's allowable loss from the apartment?

Carmen purchased a business for $150,000 by investing $40,000 of her own funds and borrowing $110,000 from Local National Bank. Carmen signed the note payable as a personal guarantor. In the first year of operations the business had an operating loss of $120,000. During the second year, the business has an operating loss of $45,000. How much of the year two loss is deductible against Carmen's income from other business activities? Assume that Carmen materially participates in the business.

Pedro owns a 50% interest in a limited partnership that operates an apartment complex. During the current year, the partnership generates a taxable rental loss of $42,000. Pedro's other sources of income are salary of $55,000 and interest of $18,000. What is Pedro's allowable loss from the apartment?

Frasier sells some stock he purchased several years ago for $10,000 to his brother, Niles, for $6,000. I.If this is Frasier's only stock transaction, he can deduct only $3,000 of the loss. II.If Niles sells the stock for $10,000, his taxable gain is $4,000. ​

Mary and Philip purchased an apartment building in January 2011, which they actively manage. During the current year, the apartment building generates a loss of $35,000. Their other income is as follows: Sal aries \ 80,000 Dividends and interest 8,000 Loss from limited partnership acquired in 2009 (4,000) What is Mary and Philip's adjusted gross income?

Brent is single and owns a passive activity that has a basis of $25,000 and a suspended passive loss of $8,000. He acquired the passive activity in 2010. Brent's taxable income from active and portfolio income is $85,000, and he has no other capital gains or losses for the year. a.What is the effect on Brent's taxable income if he sells the passive activity for $42,000? b.What is the effect on Brent's taxable income if he sells the passive activity for $13,000? c.What is the effect on Brent's taxable income if he dies this year while the fair market value of the passive activity is $30,000? d.What is the effect on Brent's taxable income if he dies this year while the fair market value of the passive activity is $18,000? e.What is the effect on Brent's taxable income if he gives the passive activity to his brother Norm when the fair market value of the passive activity is $30,000?

Maria, an engineer, has adjusted gross income of $167,000 before considering the following losses. The passive activity rules disallow the deduction for the loss in which of the following? I.Maria has a $21,000 loss from her ownership of Family Apartment Village, a low-income housing project. II.Maria owns and actively participates in managing a rental house across the street from East State College. This activity generates a $7,000 loss in the current year. ​

Match each statement with the correct term below. -Personal casualty loss

Tyrone is the president of JWH Manufacturing and owns 30% of its stock. JWH is organized as an S corporation. During 2018, JWH has a loss of $240,000. At the beginning of 2018, Tyrone's amount at-risk in JWH is $60,000. a.What is Tyrone' deductible loss in 2018? What is Tyrone's at-risk amount at the end of 2018? b.In 2019, JWH has a taxable income of $100,000. What is the effect on Tyrone's 2019 income? What is Tyrone's at-risk amount at the end of 2019??

Bowden is a single individual and has the following income (loss) for the current tax year: ? Salary \ 85,000 Dividends and interest 24,000 Actively managed rental property (23,000) What is Bowden's adjusted gross income for this year?

A taxpayer had the following for the current year: ? Active Portfolio Passive Income \ 75,000 \ 22,000 \ 55,000 Deductions (45,000) (16,000) (110,000) Income(Loss) \ 30,000 \ 6,000 \ (55,000) I.If the taxpayer is a closely held corporation, taxable income from the three activities is income of $6,000. II.If the taxpayer is an individual and the passive income is not related to a rental real estate activity, taxable income is $36,000. ?

Why did Congress enact the at-risk rules?

Which of the following must be classified as "portfolio income?" I.Dividend income from an investment in Lincoln Corp. common stock. II.Royalty income from the ownership of the mineral rights on land. The taxpayer does not share the expenses with the extraction company. ​

Gloria owns 750 shares of the Greene Company that she acquired in 2008 for $9,000. On June 12 of the current year, she sells 500 shares of Greene for $4,000. Two weeks later on June 26, Gloria purchases 200 shares of Greene for $2,200. What are the effects of the June 12 sale? Explain.

A passive activity I.includes any trade or business in which a taxpayer does not materially participate. II.includes rentals of apartment buildings, rental houses, etc., where no significant personal services are involved. ​

Natalie is the owner of an apartment complex. She actively participates in the management of the building. During the current year, it generates a taxable loss of $33,000. Natalie's other sources of income are salary of $114,000 and interest of $16,000. What is Natalie's allowable loss from the apartment in the current year?