Question 1

Which of the following losses are generally deductible?
I.Loss on the sale of corporate stock.
II.Losses incurred in carrying on a trade or business.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 2

Tim owns 3 passive investments. During the current year, he has the following income and loss from each activity:
?
$\begin{array}{lc}
\text { Activity 1 } & \$(7,000) \
\text { Activity } 2 & (3,000) \
\text { Activity 3 } & 4,000
\end{array}$

What is the amount of suspended loss allocated to Activity 2?

Accepted Answer

A) $- 0 - 
B) $1,800 
C) $3,000 
D) $4,200 
E) $6,000 
A) $- 0 - 
B) $1,800 
C) $3,000 
D) $4,200 
E) $6,000

Question 3

Match each statement with the correct term below.
-NOL carryforward

Accepted Answer

A) A loss that is generally not deductible. 
B) The borrower is personally liable for the debt. 
C) The loss is used to offset income in future periods. 
D) A liability that is only secured by the underlying property. 
E) The loss may be used to offset income from prior periods.
F)A type of stock that receives some ordinary loss treatment.
G)Involved in a rental activity for more than 500 hours in a year.
H)Cash or other assets contributed plus recourse debts of the activity.
I)Owns at least a 10% interest and is significantly involved in the rental activity.
J)The amount of the loss for fully destroyed property is the property's adjusted basis.
K)The amount of loss is limited to the lower of the property's adjusted basis, or the reduction in fair market value.
L)Management is left to at least one general partner whose liability is not limited and who is responsible for the on-going activities of the business. 
A) A loss that is generally not deductible. 
B) The borrower is personally liable for the debt. 
C) The loss is used to offset income in future periods. 
D) A liability that is only secured by the underlying property. 
E) The loss may be used to offset income from prior periods.
F)A type of stock that receives some ordinary loss treatment.
G)Involved in a rental activity for more than 500 hours in a year.
H)Cash or other assets contributed plus recourse debts of the activity.
I)Owns at least a 10% interest and is significantly involved in the rental activity.
J)The amount of the loss for fully destroyed property is the property's adjusted basis.
K)The amount of loss is limited to the lower of the property's adjusted basis, or the reduction in fair market value.
L)Management is left to at least one general partner whose liability is not limited and who is responsible for the on-going activities of the business.

Question 4

Match each statement with the correct term below.
-Net operating loss

Accepted Answer

A) Limited to $3,000 annually for individuals. 
B) When an asset is disposed of for less than its basis. 
C) An excess of business deductions over business income. 
D) A trade or business in which the taxpayer is not a material participant. 
E) A loss that results from some sudden, unexpected, or unusual event.
F)Any asset that is not a receivable, inventory, or depreciable or real property used in a trade or business. 
A) Limited to $3,000 annually for individuals. 
B) When an asset is disposed of for less than its basis. 
C) An excess of business deductions over business income. 
D) A trade or business in which the taxpayer is not a material participant. 
E) A loss that results from some sudden, unexpected, or unusual event.
F)Any asset that is not a receivable, inventory, or depreciable or real property used in a trade or business.

Question 5

Discuss the difference(s) between the real estate professional exception and the active participation exception when dealing with rental properties.

Accepted Answer

(1) The primary difference between these

Question 6

During the year Wilbur has the following capital gains and losses:
?
 $$\begin{array} { l c } 
\text { Short-term capital gains } & \$ 4,500 \
\text { Short-term capital losses } & ( 6,000 ) \
\text { Long-term capital gains } & 4,200 \
\text { Long-term capital losses } & ( 7,500 )
\end{array}$$ 
What is the effect of the capital gains and losses on Wilbur's taxable income?

Accepted Answer

The short-term gains and losses are nett

Question 7

Portfolio income consists of unearned income from dividends, interest, royalties, annuities, and other assets held as investments.

Accepted Answer

A) True 
 B)False

Question 8

Jerome owns a farm, which has three separate houses. He rents out two of the houses and lives in the other house. During 2018, a tornado, a federally-declared disaster, goes through his property causing damage to the houses. Rental House A had a fair market value of $40,000 and an adjusted basis of $20,000, but it is not damaged by the tornado. A local real estate agent told Jerome that because of the tornado, property values in the area have declined 10%. Rental House B, which has an adjusted basis of $25,000, is worth $60,000 before the tornado and $20,000 after the tornado. Jerome's insurance company pays him $20,000 for the damage to Rental House B. Jerome's residence (which has an adjusted basis of $80,000) was worth $70,000 before it is totally destroyed by the tornado. Jerome's insurance company reimburses him $60,000 for the loss of his residence. Ignore the limitation based on Adjusted Gross Income.
I.Jerome deducts a loss of $5,000 on Rental House A.
II.Jerome deducts a loss of $35,000 on Rental House B.
III.Jerome's loss on his residence is $9,900.
IV.Jerome cannot deduct a loss on Rental House A.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Only statement III is correct. 
D) Statements II and IV are correct. 
E) Statements III and IV are correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Only statement III is correct. 
D) Statements II and IV are correct. 
E) Statements III and IV are correct.

Question 9

Any corporate capital loss not used in the current year can be carried back 2 years and carried forward 20 years to offset capital gains in those years.

Accepted Answer

A) True 
 B)False

Which of the following losses are generally deductible? I.Loss on the sale of corporate stock. II.Losses incurred in carrying on a trade or business.

Match each statement with the correct term below. -NOL carryforward

Match each statement with the correct term below. -Net operating loss

Discuss the difference(s) between the real estate professional exception and the active participation exception when dealing with rental properties.

During the year Wilbur has the following capital gains and losses: ? Short-term capital gains \ 4,500 Short-term capital losses (6,000) Long-term capital gains 4,200 Long-term capital losses (7,500) What is the effect of the capital gains and losses on Wilbur's taxable income?

Portfolio income consists of unearned income from dividends, interest, royalties, annuities, and other assets held as investments.

Any corporate capital loss not used in the current year can be carried back 2 years and carried forward 20 years to offset capital gains in those years.

Federal Income Taxation-An Overview

Income Tax Concepts

Income Sources

Income Exclusions

Introduction to Business Expenses

Business Expenses

Taxation of Individuals

Acquisitions of Property

Cost Recovery on Property: Depreciation, Depletion, and Amortization

Property Dispositions

Non-Recognition Transactions

Choice of Business Entity-General Tax and Nontax Factorsformation

Choice of Business Entity-Operations and Distributions

Choice of Business Entity-Other Considerations

Tax Research

Filters

Exam 7: Losses-Deductions and Limitations

Which of the following losses are generally deductible? I.Loss on the sale of corporate stock. II.Losses incurred in carrying on a trade or business. ​

Match each statement with the correct term below. -NOL carryforward

Match each statement with the correct term below. -Net operating loss

Discuss the difference(s) between the real estate professional exception and the active participation exception when dealing with rental properties.

During the year Wilbur has the following capital gains and losses: ? Short-term capital gains \ 4,500 Short-term capital losses (6,000) Long-term capital gains 4,200 Long-term capital losses (7,500) What is the effect of the capital gains and losses on Wilbur's taxable income?

Portfolio income consists of unearned income from dividends, interest, royalties, annuities, and other assets held as investments.

Any corporate capital loss not used in the current year can be carried back 2 years and carried forward 20 years to offset capital gains in those years.

Federal Income Taxation-An Overview

Income Tax Concepts

Income Sources

Income Exclusions

Introduction to Business Expenses

Business Expenses

Taxation of Individuals

Acquisitions of Property

Cost Recovery on Property: Depreciation, Depletion, and Amortization

Property Dispositions

Non-Recognition Transactions

Choice of Business Entity-General Tax and Nontax Factorsformation

Choice of Business Entity-Operations and Distributions

Choice of Business Entity-Other Considerations

Tax Research

Filters

Which of the following losses are generally deductible? I.Loss on the sale of corporate stock. II.Losses incurred in carrying on a trade or business.