Deck 7: Losses-Deductions and Limitations

Question 1

John discovers that termites have destroyed the front porch of his office building. The damage occurred over a 3- year period. He is eligible for a casualty loss deduction.

Answer 1

False

Question 2

A corporation has a net capital loss. The significance of a net capital loss in 2013 for a corporation is that it can be carried back 3 years and carried forward 5 years by a corporation to offset capital gains in other taxable years.

Answer 2

True

Question 3

Dwight owns an apartment complex that has a $30,000 loss. His adjusted gross income is $85,000 before the loss. Since he qualifies as an active participant he may deduct $25,000.

Answer 3

True

Question 4

A closely held corporation cannot offset net passive losses against income of the business.

Question 5

Material participation requires that an individual participates in an activity for more than 200 hours per year or spends more than 50 hours a year in the activity and the time spent is more than anyone else spends on the activity.

Question 6

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.

Question 7

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

Question 8

Constance owns a boutique. During the current year, she has gross income of $400,000 and allowable deductions related to the business of $425,000. I. Constance has incurred a transaction loss, which represents her unrecovered cost of capital. II. Constance has suffered an annual loss, which may be carried back 2 years or forward 20 years if not used in the current year.

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

Question 9

Baker Corporation suffers a net operating loss NOL) of $65,000 in 2013. Baker was incorporated in 2011. Baker had a NOL of $20,000 in 2011 and taxable income of $35,000 in 2012. The corporation expects a taxable income of $200,000 in 2014. What valid alternatives are available to Baker concerning the $50,000 loss? I. Baker can carryback the loss to 2014 and will receive a refund of $2,250. II. Baker can elect to carryforward the loss and expect to receive tax savings of $19,500. Only statement I is correct. Only statement II is correct. Both statements are correct. Neither statement is correct.

Question 10

Barry owns all of the stock of Jerrico Corporation; an internet based gaming firm. Barry is also the President of and works full-time for Jerrico. During the current year, Jerrico has a loss of $125,000 from its operations. I. If Jerrico is an S Corporation, Barry may deduct the loss on his personal tax return as a deduction for AGI. II. If Jerrico is a regular corporation, the corporation can elect to carryforward the loss to reduce taxable income during the next 20 years.

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

Question 11

Virginia owns a business that rents power equipment to construction companies. Despite maintaining, delivering, and picking up the equipment, Virginia's business is passive since it is a rental activity.

Question 12

Lu-Yin purchased her consulting business with $75,000 of her own funds and she borrowed $125,000 from the local bank. If she is personally responsible for the loan, she is at risk only for $50,000.

Question 13

The Baskerville Corporation has a net $6,500 capital loss during the current taxable year. They will be able to deduct $3,000 this year and carries the remaining $3,500 forward.

Question 14

An operating loss occurs when an entity's deductions exceeds the income generated for the period.

Question 15

The term tax shelter refers to investment property that involves residential and commercial real estate.

Question 16

Kenneth owns all of the stock of Kearney Corporation. Kenneth is also the President of Kearney and works full- time running the corporation. During the current year, Kearney has a loss of $40,000 from its operations. I. If Kearney is an S Corporation, the corporation may carryback the loss 2 years and obtain a refund of taxes paid) with any remaining loss carried forward 20 years. II. If Kearney is a regular corporation, Kenneth may deduct the loss for AGI on his personal tax return because the corporation is a flow through entity.

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

Question 17

Perry owns all of the stock of Sound Corporation. Perry is also the President of Sound and works full-time running Sound. During the current year, Sound has a loss of $75,000 from its operations. I. If Sound is an S Corporation, Perry deducts the loss on his personal tax return as a deduction from AGI. II. If Sound is a regular corporation, the corporation can elect to carryforward the loss to reduce taxable income during the next 20 years.

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

Question 18

Leon is allowed to deduct all the current and suspended losses on his passive activity if he sells his entire interest in the passive activity during the year.

Question 19

A transaction loss occurs when an asset is disposed of at less than its basis.

Question 20

While most rental activities are classified as passive, an exception is low-income housing.

Question 21

Maria, an engineer, has adjusted gross income of $167,000 before considering the following losses. The passive activity rules disallow the deduction for the loss in which of the following? I. Maria has a $21,000 loss from her ownership of Family Apartment Village, a low-income housing project. II. Maria owns and actively participates in managing a rental house across the street from East State College. This activity generates a $7,000 loss in the current year.

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

Question 22

Which of the following must be classified as "portfolio income?" I. Dividend income from an investment in Lincoln Corp. common stock. II. Royalty income from the ownership of the mineral rights on land. The taxpayer does not share the expenses with the extraction company.

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

Question 23

If a taxpayer has the following for the current year: I. If the taxpayer is a regular corporation, taxable income from the three activities is a loss of $19,000. II. If the taxpayer is an individual and the passive income is related to a rental real estate activity in which the taxpayer is an active participant, taxable income is $11,000.

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

Question 24

Salvador owns a passive activity that has a basis of $44,000 and a suspended loss of $18,000. Salvador's taxable income from active and portfolio income is $55,000. If Salvador's sells the passive activity for $56,000 how will he report the transaction on his tax return? I. Salvador will report an ordinary loss of $18,000. II. Salvador will report a capital gain of $12,000.

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

Question 25

Susan is the owner of a 35-unit apartment complex. She spends 950 hours a year managing the property. In addition, she works part-time for a mortgage company. She spends 1,150 hours a year as a bookkeeper at the mortgage company. The apartment complex generated a loss of $32,000, and Susan's adjusted gross income for the current year, before considering the apartment complex, is $48,000. How much of the loss can Susan deduct?

A) $ - 0 -
B) $14,476
C) $16,727
D) $25,000
E) $32,000

Question 26

Sullivan, a pilot for Northern Airlines, has adjusted gross income of $92,000 before considering the following losses. The passive activity rules disallow the deduction for a loss in which of the following? Sullivan has a $4,500 loss from his ownership interest in Cowco, a feeder-cattle limited I. partnership. Sullivan is a general partner and is responsible for day-to-day management decisions. II. Sullivan has a $7,000 loss from his ownership interest in Swineco, a feeder-pig limited partnership. Sullivan is a limited partner.

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

Question 27

Jose, Mahlon, and Eric are partners in New Communications Partnership. Jose owns a 50% interest, Mahlon owns a 35% interest, and Eric owns a 15% interest. During the current year the first year of operation for the enterprise), the business has a loss. Although the partnership is established as a general partnership, Jose functions as the manager and performs all of the day-to-day duties of a chief operating officer. Mahlon and Eric are merely investors who receive monthly reports about the business. At the close of the current tax year, each partner will receive a share of the partnership loss. Which of the partners will be able to deduct his their) share of the partnership loss? I. Jose II. Mahlon III. Eric

A) Mahlon
B) Jose, Mahlon, and Eric
C) Jose
D) Jose and Mahlon
E) Mahlon and Eric

Question 28

Which of the following must be classified as "portfolio income?" I. Interest income on CDs from First National Bank. II. Loss realized from the sale of one-half of his stock shares in Lockleed Corp. Lockleed is qualified small business stock.

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

Question 29

A passive activity I. includes any trade or business in which a taxpayer does not materially participate. II. includes rentals of apartment buildings, rental houses, etc., where no significant personal services are involved.

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

Question 30

Travis is a 30% owner of 3 rental houses. He spends 625 hours a year managing the properties. In addition, he owns a 20% interest in a real estate business to which he devotes 1,800 hours a year. The rental units generate a total loss of $22,000, and Travis' adjusted gross income in the current year, before considering the rental properties, is $120,000. How much of the loss can Travis deduct?

A) $ - 0 -
B) $ 4,500
C) $ 6,600
D) $15,000
E) $22,000

Question 31

During the current year, Alyssa incurred a net loss of $27,500 from a 5 percent interest in a partnership that operated and managed an office building. Alyssa had adjusted gross income from other sources of $110,000 and spent 67 hours assisting in the management of the building. Determine Alyssa's total adjusted gross income for the current year.

A) $ 82,500
B) $ 90,000
C) $100,000
D) $105,000
E) $110,000

Question 32

Pedro owns a 50% interest in a limited partnership that operates an apartment complex. During the current year, the partnership generates a taxable rental loss of $42,000. Pedro's other sources of income are salary of $55,000 and interest of $18,000. What is Pedro's allowable loss from the apartment?

A) $ - 0 -
B) $18,000
C) $21,000
D) $25,000
E) None of the above.

Question 33

Kenzie and Ross equally own rental real estate. The rental property generated a loss of $20,000. Kenzie is also employed as a part-time Tupperware salesperson and full time as a real estate agent. For her share of the loss to be fully deductible, she must: I. Not have an adjusted gross income in excess of $100,000. II. Spend more than 750 hours, in total, as a realtor III. Spend more than 100 hours managing the rental activity, and spend more time than Ross. IV. She must spend more than 50% of her time as a realtor and must own more than 5% of the real estate agency.

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

Question 34

A taxpayer had the following for the current year: I. If the taxpayer is a closely held corporation, taxable income from the three activities is income of $6,000. II. If the taxpayer is an individual and the passive income is not related to a rental real estate activity, taxable income is $36,000.

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

Question 35

A passive activity I. includes an interest in a limited partnership held by a limited partner investor. II. includes a working interest in an oil and gas deposit.

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

Question 36

During the year, Aimee reports $30,000 of active business income, $15,000 of income from passive activity X, and a $25,000 loss from passive activity Y. Determine the tax consequences of these events. I. The $15,000 income from activity X can offset $15,000 of the loss from activity Y. II. Any passive loss that is not deducted in the current year is suspended.

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

Question 37

Janine is an engineering professor at Southern College. Her annual salary is $110,000. She owns two 3-unit apartment buildings near the university. Because of the proximity to campus, Janine actively manages the property. During the current year, the rental of the property produced a $29,500 loss. How much of the loss may Janine deduct for the current year?

A) $ - 0 -
B) $14,750
C) $20,000
D) $25,000
E) $29,500

Question 38

During 2013, Pamela worked two "jobs." She performed financial consulting activities for 1,000 hours and real estate development and rental activities for 1,200 hours. Her real estate development and rental activities produced a loss of $35,000. Her financial consulting generated a net business income of $40,000. How much of the loss can Pamela deduct against her financial consulting income?

Question 39

Carmen purchased a business for $150,000 by investing $40,000 of her own funds and borrowing $110,000 from Local National Bank. Carmen signed the note payable as a personal guarantor. In the first year of operations the business had an operating loss of $120,000. During the second year, the business has an operating loss of $45,000. How much of the year two loss is deductible against Carmen's income from other business activities? Assume that Carmen materially participates in the business.

A) $ - 0 -
B) $ 15,000
C) $ 30,000
D) $ 45,000
E) $120,000

Question 40

If an individual is not a material participant, a rental activity is considered passive. However, certain rental activities are not deemed to be rentals for passive loss purposes even if the individual is not a material participant. Which of the following is not excluded from the passive loss rules?

A) Golf cart rentals.
B) Hotel rooms.
C) Jet ski rentals.
D) Apartment rentals.
E) Construction equipment rentals.

Question 41

Ling owns 3 passive investments. During the last two years, she has the following income and loss from each

Question 42

Darien owns a passive activity that has a basis of $36,000 and a suspended loss of $22,000. If Darien dies during the year when the passive activity has a fair market value of $52,000, how will the information be presented on his tax return? I. Darien will report an ordinary loss of $6,000. II. Darien will report a capital gain of $16,000.

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

Question 43

Karl has the following income loss) during the current year: What is Karl's adjusted gross income for this year?

A) $23,500
B) $31,400
C) $32,500
D) $45,500
E) $57,500

Question 44

Anna owns a passive activity that has a basis of $30,000 and a suspended loss of $7,000. Anna gifts the passive activity to her daughter Patricia when the property has a fair market value of $42,000. I. Anna will report an ordinary loss of $7,000. II. Patricia's basis in the passive activity is $30,000.

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

Question 45

Nancy is the owner of an apartment complex. She actively participates in the management of the building. During the current year, it generates a taxable loss of $27,000. Nancy's other sources of income are salary of $52,000 and interest of $21,000. What is Nancy's allowable loss from the apartment?

A) $ - 0 -
B) $18,000
C) $25,000
D) $27,000
E) None of the above.

Question 46

Loren owns three passive activities that had the following results for the current year: If none of the passive activities are rental real estate activities, what is the amount of suspended loss attributable to Activity C?

A) $ - 0 -
B) $18,750
C) $20,000
D) $25,000
E) $40,000

Question 47

"Active participation" and "real estate professional" are both exceptions to the general rule for passive activity losses with rental real estate. I. A taxpayer qualifying under both exceptions is limited to a maximum annual deduction of $25,000. II. Active participation results from owning at least a 10% interest in the activity and arranging for repairs and maintenance and collecting rents.

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

Question 48

Judy and Larry are married and their combined salaries for the current year are $115,000. They actively participate in the rental of two houses. For the current year they have the following losses: Income/Loss)

Question 49

Sarah owns a passive activity that has a suspended loss of $18,000. The activity has a fair market value of $35,000 and her adjusted basis in the activity is $20,000. I. If Sarah sells the activity, she is allowed to deduct the $18,000 suspended loss. II. If Sarah gifts the activity, she is only be allowed to deduct $15,000 of the suspended loss.

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

Question 50

Tim owns 3 passive investments. During the current year, he has the following income and loss from each activity: What is the amount of suspended loss allocated to Activity 2?

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

Question 51

Linda owns three passive activities that had the following results for the current year: If none of the passive activities are rental real estate activities, what is the amount of suspended loss attributable to Activity A?

A) $ - 0 -
B) $ 1,500
C) $ 4,500
D) $ 8,500
E) $10,000

Question 52

Ricardo owns interests in 3 passive activities: A, B, and C. During the current year, activity A realizes income of $8,000 while activities B and C realize losses of $16,000 and $24,000, respectively. Determine the amount of suspended loss attributable to activity C.

A) $ - 0 -
B) $ 8,000
C) $12,800
D) $19,200
E) $24,000

Question 53

Norris owns a passive activity that has a suspended loss of $12,000. The activity has a fair market value of $42,000 and his adjusted basis in the activity is $27,000. I. If Norris gifts the property, he is allowed to deduct $3,000 of the suspended loss. II. If Norris dies, none of the suspended loss is deductible.

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

Question 54

Bowden is a single individual and has the following income loss) for the current tax year: What is Bowden's adjusted gross income for this year?

A) $ 85,000
B) $ 86,000
C) $ 88,500
D) $ 89,500
E) $109,000

Question 55

Mark has an adjusted gross income of $154,000. Not included in his adjusted gross income is a $16,000 loss from a passive activity. Which of the following statements regarding the effect of the passive loss on his adjusted gross income is/are correct? I. If the activity does not involve rental real estate, he can only deduct the loss as a miscellaneous itemized deduction. II. If the activity is rental real estate and Mark is an active participant, he can deduct the $16,000 loss for adjusted gross income.

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

Question 56

"Active participation" and "real estate professional" are both exceptions to the general rule for passive activity losses with rental real estate. I. One of the tests that an individual must meet to qualify as a real estate professional is that the taxpayer spends more than 50% of his/her time in real property trades or businesses. II. A taxpayer with an AGI of $190,000 qualifying under the real estate professional exception may deduct an unlimited amount of rental real estate losses.

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

Question 57

During the current year, Diane disposes of Fine Foods Limited Partnership, at a gain of $12,000. Diane's adjusted gross income from non-passive sources is $120,000. She has a suspended loss from Fine Foods of $22,000, and a loss from other passive activities of $4,500. What is the amount of Diane's adjusted gross income for the current year?

A) $ 95,550
B) $105,500
C) $110,000
D) $115,500
E) $120,000

Question 58

Nelson is the owner of an apartment complex. He actively participates in the management of the building. During the current year, it generates a taxable loss of $33,000. Nelson's other sources of income are salary of $148,000 and interest of $12,000. What is Nelson's allowable loss from the apartment?

A) $ - 0 -
B) $ 1,000
C) $12,000
D) $25,000
E) $33,000.

Question 59

Natalie is the owner of an apartment complex. She actively participates in the management of the building. During the current year, it generates a taxable loss of $33,000. Natalie's other sources of income are salary of $114,000 and interest of $16,000. What is Natalie's allowable loss from the apartment in the current year?

A) $ -0-
B) $10,000
C) $15,000
D) $16,000
E) $25,000

Question 60

Rose has an adjusted gross income of $130,000. Not included in her adjusted gross income is a $15,000 loss from a passive activity. Which of the following statements regarding the effect of the passive loss on his adjusted gross income is/are correct? I. If the activity is rental real estate and Rose meets the real estate professional exception, she can deduct the $15,000 loss for adjusted gross income. II. If the activity is rental real estate and Rose is an active participant, she can deduct $5,000 of the loss for adjusted gross income.

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

Question 61

During the current year, Schmidt Corporation has operating income of $75,000 and a net capital loss of $25,000. What is Schmidt's taxable income?

A) $ - 0 -
B) $50,000
C) $72,000
D) $75,000
E) $90,000

Question 62

Roscoe and Amy are married and own 12,000 shares of qualifying small business stock that they purchased for $150,000. During the current year, they sell 10,000 shares of the small business stock to an unrelated third party for $30,000. Eager to sell the remaining shares, they sell the other 2,000 shares to Amy's sister for $4,000. In addition, they sell stock with a basis of $5,000 for $10,000. The stock was acquired in 2007. In 2010, Roscoe and Amy loaned her brother, Carl, $8,000 to start his business. Carl has only repaid $2,000 on his documented loan. During the year, Carl has filed for bankruptcy. The bankruptcy court liquidates all of Carl's assets and Roscoe and Amy receive nothing from the liquidation. I. Roscoe and Amy can deduct $120,000 as an ordinary loss on the small business stock. II. Roscoe and Amy have a net short-term capital loss of $1,000.

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

Question 63

Frasier sells some stock he purchased several years ago for $10,000 to his brother, Niles, for $6,000. I. If this is Frasier's only stock transaction, he can deduct only $3,000 of the loss. II. If Niles sells the stock for $10,000, his taxable gain is $4,000.

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

Question 64

Gomez, a self-employed consultant, is involved in a traffic accident with his business-use automobile. The car is totally destroyed and Gomez's insurance policy reimburses him $8,000 for the fair market value of the car immediately before the accident. His basis in the car is $11,000. What is the amount of Gomez's casualty loss deduction?

A) $ - 0 -
B) $ 2,000
C) $ 3,000
D) $ 8,000
E) $11,000

Question 65

Which of the following is true concerning capital losses and net operating losses for corporations: Capital loss Net operating loss

A) Carried back 5 years Carried back 2 years
B) Carried back 5 years Carried forward 20 years
C) Carried back 3 years Carried forward 20 years
D) Carried back 5 years Carried forward 5 years
E) Carried back 3 years Carried forward 5 years

Question 66

Rosanna, a single taxpayer, owns 2,000 shares of qualifying small business stock that she purchased for $225,000. During the current year, she sells 800 of the shares for $30,000. If this is the only stock Rosanna sells during the year, what can she deduct as an ordinary and capital loss?

Question 67

Melinda and Riley are married taxpayers. During the year, they completed a single capital asset sale in which a loss of $120,000 is realized on the sale $15,000 amount realized, less $135,000 adjusted basis) of qualified small business stock. How much of the loss can the taxpayers deduct?

A) $ 3,000
B) $ 53,000
C) $100,000
D) $103,000
E) $120,000

Question 68

Mario's delivery van is completely destroyed when a tree fell on it. Mario's insurance company pays him $11,000 for the accident. The van cost $20,000 three years ago. Tax depreciation deductions of $6,000 have been taken to date. The "Blue Book value" i.e., fair market value) of the van is $12,000 on the accident date. What is Mario's casualty loss on the van?

A) $ - 0 -
B) $ 1,000
C) $ 3,000
D) $ 8,000
E) $13,000

Question 69

In addition to his salary, Peter realizes a $1,000 short-term capital gain and a $5,000 long-term capital loss. The net effect of the capital asset transactions on Peter's adjusted gross income is

A) $ -0-
B) $ 1,000
C) $ 3,000)
D) $ 4,000)
E) $ 5,000)

Question 70

Aunt Bea sold some stock she purchased several years ago for $10,000 to her nephew, Andy, for $6,000. I. If this is Aunt Bea's only stock transaction, she can deduct only $3,000 of the loss. II. If Andy sells the stock for $10,000, his taxable gain is $4,000.

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

Question 71

In April of the current year, Speedy Printing Company's delivery van is stolen. The van was originally purchased in 2007 for $13,000, and its fair market value at the time of the theft is $4,000. The van has a zero adjusted basis on the books of Speedy. The previous year, Speedy dropped theft insurance on the van, so it receives no compensation for the loss from its insurance company. What amount of loss can Speedy deduct?

A) $ - 0 -
B) $ 4,000
C) $10,900
D) $12,900
E) $13,000

Question 72

Which of the following events is a "casualty" loss? I. Diamonds stolen by thief, reported to police II. Florida orange trees killed by a freeze.

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

Question 73

Billingsworth Corporation has the following net capital gains and losses for 2009 through 2012. Billingsworth' marginal tax rate is 34% for all years. In 2013, Billingsworth Corporation earned net operating income of $30,000. What is/are the tax effects) of the $9,000 net capital loss in 2012? I. Corporate taxable income is $21,000. II. The net capital loss will provide income tax refunds totaling $3,060. Only statement I is correct. Only statement II is correct. Both statements are correct. Neither statement is correct.

Question 74

Ford's automobile that he uses 100% for business is vandalized. The adjusted basis before the vandalism is $3,000. The fair market value of the car before the vandalism is $7,000, and the fair market value of the property after the vandalism is $2,000. Ford's insurance does not cover vandalism. What is Ford's loss deduction for the year?

A) $ - 0 -
B) $1,000
C) $2,000
D) $3,000
E) $5,000

Question 75

Which of the following events is a "casualty" loss? I. Lightning damage. II. Loss of the topsoil on a farm from a flood.

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

Question 76

During the current year, Terry has a short-term capital loss of $9,000 and a long-term capital gain of $3,000. Due to these transactions Terry reports

A) A capital loss deduction of $3,000 and a loss carryforward of $3,000
B) A capital loss deduction of $3,000 and a loss carryforward of $6,000.
C) A capital loss deduction of $9,000.
D) A capital gain of $3,000 and a loss carryforward of $9,000.
E) A capital loss deduction of $6,000

Question 77

Which of the following losses are generally deductible? I. Loss on the sale of a personal residence. II. Loss due to the theft of business inventory.

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

Question 78

Jennifer's business storage shed is damaged by a hail storm. The shed is uninsured. Its adjusted basis is $8,000. Just before the accident the shed is appraised for $10,000. In its damaged condition, the shed can be sold for $4,000. What is Jennifer's loss from the storm?

A) $ - 0 -
B) $ 4,000
C) $ 6,000
D) $ 8,000
E) $10,000

Question 79

All of the following are capital assets, except

A) Personal residence.
B) Land used for business parking lot.
C) Pickup truck used for personal transportation..
D) Corporate bonds held for investment purposes.
E) A hand-written letter by Dwight Eisenhower held in a private collection.

Question 80

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.

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