Posted: September 16th, 2017
Tax quiz 7
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Ch. 7 TF
Question 1 0 / 1 point
Taxpayer’s home was destroyed by a storm in the current year and the area was declared a disaster area. If the taxpayer elects to treat the loss as having occurred in the prior year, it will be subject to the 10%-of-AGI reduction based on the AGI of the current year.
In True
Correct Answer False
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Question 2 1 / 1 point
A corporation which makes a loan to a shareholder can have a nonbusiness bad debt deduction.
True
False
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Question 3 1 / 1 point
If a taxpayer sells their § 1244 stock at a loss, all of the loss will be ordinary loss.
True
False
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Question 4 1 / 1 point
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.
True
False
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Question 5 1 / 1 point
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.
True
False
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Ch. 7 MC
Question 6 1 / 1 point
In 2013, Sarah (who files as single) had silverware worth $10,000 (basis $6,000) stolen from her home. Sarah’s insurance company told her that her policy did not cover the theft. Sarah’s other itemized deductions last year were $2,000. She had AGI of $30,000 last year. In August of 2014, Sarah’s insurance company decided that Sarah’s policy did cover the theft of the silverware and they paid Sarah $5,000. Determine the tax treatment of the $5,000 received by Sarah during 2014.
None of the $5,000 should be included in gross income.
$2,900 should be included in gross income.
$5,000 should be included in gross income.
Last year’s return should be amended to include the $5,000.
None of the above.
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Question 7 1 / 1 point
Jed is an electrician. Jed and his wife are accrual basis taxpayers and file a joint return. Jed wired a new house for Alison and billed her $15,000. Alison paid Jed $10,000 and refused to pay the remainder of the bill, claiming the fee to be exorbitant. Jed took Alison to Small Claims Court for the unpaid amount and was awarded a $2,000 judgement. Jed was able to collect the judgement but not the remainder of the bill from Alison. What amount of loss may Jed deduct in the current year?
$0.
$2,000.
$3,000.
$5,000.
None of the above.
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Question 8 1 / 1 point
John files a return as a single taxpayer. In 2014, he had the following items:
? Salary of $40,000.
? Loss of $65,000 on the sale of § 1244 stock acquired two years ago.
? Interest income of $6,000.
Determine John’s AGI for 2014.
($5,000).
$0.
$45,000.
$51,000.
None of the above.
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Question 9 1 / 1 point
On June 2, 2013, Fred’s TV Sales sold Mark a large HD TV, on account, for $12,000. Fred’s TV Sales uses the accrual method. In 2014, 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 2015, final settlement was made and Fred received $1,000. How much bad debt loss can Fred deduct in 2015?
$0.
$7,000.
$8,000.
$12,000.
None of the above.
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Question 10 1 / 1 point
In 2014, Theo, an employee, had a salary of $30,000 and experienced the following losses:
Loss from damage to rental property
($10,000)
Unreimbursed loss from theft of business computer
(5,000)
Personal casualty gain
4,000
Personal casualty loss (after $100 floor)
(9,000)
Determine the amount of Theo’s itemized deduction from these losses.
$0.
$2,800.
$2,900.
$4,580.
None of the above.
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