FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

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

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 31

True/False

Review LaterAdd Note

Review Later

If qualified production activities income (QPAI)cannot be used in the calculation of the domestic production activities deduction in 2011 because of the taxable income limitation,the product of the amount not allowed multiplied by 9% can be carried over for 5 years.

A) True
B) False

Correct Answer

verified

Show Answer

Question 32

Multiple Choice

Review LaterAdd Note

Review Later

Alma is in the business of dairy farming.During the year,one of her barns was completely destroyed by fire.The adjusted basis of the barn was $90,000.The fair market value of the barn before the fire was $75,000.The barn was insured for 95% of its fair market value,and Alma recovered this amount under the insurance policy.Alma has adjusted gross income for the year of $40,000 (before considering the casualty) .Determine the amount of loss she can deduct on her tax return for the current year.

A) $3,750.
B) $14,650.
C) $14,750.
D) $18,750.
E) None of the above.

F) B) and C)
G) B) and E)

Correct Answer

verified

Show Answer

Question 33

Essay

Review LaterAdd Note

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

Ivory,Inc.,has taxable income of $600,000 and qualified production activities income (QPAI) of $400,000 in 2011.Ivory's domestic production activities deduction is:

In 2011,Morley,a single taxpayer,had an AGI of $30,000 before considering the following items: Determine the amount of Morley's itemized deduction from the losses.

The domestic production activities deduction (DPAD)for 2011 cannot exceed 50% of all W-2 wages paid to employees by the taxpayer during the tax year.

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

Three years ago,Sharon loaned her sister $30,000 to buy a car.A note was issued for the loan with the provision for monthly payments of principal and interest.Last year,Sharon purchased a car from the same dealer,Hank's Auto.As partial payment for the car,the dealer accepted the note from Sharon's sister.At the time Sharon purchased the car,the note had a balance of $18,000.During the current year,Sharon's sister died.Hank's Auto was notified that no further payments on the note would be received.At the time of the notification,the note had a balance due of $15,500.What is the amount of loss,with respect to the note,that Hank's Auto may claim on the current year tax return?

Five years ago,Tom loaned his son John $20,000 to start a business.A note was executed with an interest rate of 8%,which is the Federal rate.The note required monthly payments of the interest with the $20,000 due at the end of ten years.John always made the interest payments until last year.During the current year,John notified his father that he was bankrupt and would not be able to repay the $20,000 or the accrued interest of $1,800.Tom is a cash basis taxpayer whose only income is salary and interest income.The proper treatment for the nonpayment of the note is:

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

A taxpayer who sustains a casualty loss in an area designated by the President of the United States as a disaster area may take the loss in the year in which the loss occurred or elect to take the loss in the previous year.Identify factors that should be considered in deciding in which year to take the loss.

A cash basis taxpayer can deduct the cost of a product sold even though the purchaser of the product ultimately does not pay the purchase price.

Peggy is in the business of factoring accounts receivable.Last year,she purchased a $30,000 account receivable for $25,000.This year,the account was settled for $18,000.How much loss can Peggy deduct and in which year?

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 $60,000 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?

On June 2,2010,Fred's TV Sales sold Mark a large HD TV,on account,for $12,000.Fred's TV Sales uses the accrual method.In 2011,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 2012,final settlement was made and Fred received $1,000.How much bad debt loss can Fred deduct in 2012?

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 March.If Green Corporation elects a 60 month deferral and amortization period,determine the amount of the deduction for the current year.

Which of the following events would produce a deductible loss?

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

In 2011,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?

Red Company is a proprietorship owned by Sally,a single individual.Red manufactures and sells widgets.During 2011,an examination of Red's records shows the following items: