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

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Question 41

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Elizabeth has the following items for the current year: In calculating Elizabeth's net operating loss,and with respect to the above amounts only,what amount must be added back to taxable income (loss) ?

A) $0.
B) $1,000.
C) $2,000.
D) $20,000.
E) None of the above.

F) All of the above
G) A) and B)

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Question 42

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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 43

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

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.

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?

Blue Corporation incurred the following expenses in connection with the development of a new product: Blue expects to begin selling the product next year.If Blue elects to amortize research and experimental expenditures over 60 months,determine the amount of the deduction for research and experimental expenditures for the current year.

Discuss the computation of NOL remaining to be carried forward after the NOL has been applied in a carryback year.

Several years ago,John purchased 2,000 shares of Red Corporation § 1244 stock from Mark for $40,000.Last year,John sold one-half of his Red Corporation stock to Mike for $12,000.During the current year,John sold the remaining Red Corporation stock for $3,000.John has a $17,000 ($3,000 - $20,000)ordinary loss for the current year.

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:

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

If rental property is completely destroyed,the amount of the loss is the adjusted basis of the property at the time of the destruction reduced by $100 and 10% of AGI.

For the year 2012,Amber Corporation has taxable income of $880,000,alternative minimum taxable income of $600,000,and qualified production activities income (QPAI) of $640,000.The total W-2 wages paid to employees engaged in qualified domestic production activities are $116,000.Amber's DPAD for 2012 is:

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.

Khalid,who is single,had the following items for 2012: What is Khalid's NOL for 2012?

The excess of nonbusiness capital gains over nonbusiness capital losses must be added to taxable income to compute the net operating loss of an individual.

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.

On February 20,2011,Bill purchased stock in Pink Corporation (the stock is not small business stock) for $1,000.On May 1,2012,the stock became worthless.During 2012,Bill also had an $8,000 loss on § 1244 small business stock purchased two years ago,a $9,000 loss on a nonbusiness bad debt,and a $5,000 long-term capital gain.How should Bill treat these items on his 2012 tax return?

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

When a net operating loss is carried back to a non-loss year,the net operating loss will affect the charitable contribution deduction of the carryback year.

A farming NOL may be carried back 2 years.