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

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Question 1

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If a taxpayer has an NOL in 2012 of $20,000,of which $8,000 is attributable to a theft of rental use property,the taxpayer may:

A) Carry all of the NOL of $20,000 back 5 years.
B) Carry all of the NOL of $20,000 back 3 years.
C) Carry $8,000 of the NOL back 3 years and the remainder of the NOL of $12,000 back 2 years.
D) All of the above.
E) None of the above.

F) B) and E)
G) None of the above

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Question 2

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If an account receivable written off during the current year is subsequently collected during the current year,the write-off entry is reversed.

A) True
B) False

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Question 3

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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.

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.

Research and experimental expenditures do not include expenditures for ordinary testing of materials for quality control.

Red Company is a proprietorship owned by Sally,a single individual.Red manufactures and sells widgets.During 2012,an examination of Red's records shows the following items: Determine Sally's domestic production activities deduction for 2012.

A corporation which makes a loan to a shareholder can have a nonbusiness bad debt deduction.

Roger,an individual,owns a proprietorship called Green Thing.For the year 2012,Roger has the following items: · Business income-$200,000. · Business expense-$150,000. · Loss on a completely destroyed business machine.The machine had an adjusted basis of $25,000 and a fair market value of $20,000. · Loss on a business truck.The truck had an adjusted basis of $8,000.The repairs to fix the truck cost $10,000.

Neal,single and age 37,has the following items for 2012: Determine Neal's taxable income for 2012.

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.

In 2012,Mary had the following items: Assuming that Mary files as head of household (has one dependent child) ,determine her taxable income for the current year.

An unreimbursed employee business expense can create an NOL for an individual.

A nonbusiness bad debt deduction can be taken any year after the debt becomes totally worthless.

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.

Regarding research and experimental expenditures,which of the following are not qualified expenditures?

If a business debt previously deducted as partially worthless becomes totally worthless this year,only the amount not previously deducted can be deducted this 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?

The amount of a farming loss cannot exceed the amount of the taxpayer's NOL for the taxable year.

John had adjusted gross income of $60,000.During the year his personal use summer home was damaged by a fire.Pertinent data with respect to the home follows: John had an accident with his personal use car.As a result of the accident,John was cited with reckless driving and willful negligence.Pertinent data with respect to the car follows: What is John's itemized casualty loss deduction?

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