Question 1

If personal casualty gains exceed personal casualty losses after deducting the $100 floor), there is no itemized deduction.

Accepted Answer

This is correct according to the tax law. If personal casualty gains exceed personal casualty losses after deducting the $100 floor, the taxpayer does not get an itemized deduction for the net gain. However, if personal casualty losses exceed personal casualty gains, the taxpayer can deduct the excess losses as an itemized deduction on Schedule A.

Question 2

A father cannot claim a loss on his daughter's rental use property.

Accepted Answer

A father cannot claim a loss on his daughter's rental use property because he is not considered an owner or a tenant of the property. Only the owner or tenant of the property can claim the loss on their tax return.

Question 3

Losses on rental property are classified as deductions for AGI.

Accepted Answer

Losses on rental property are classified as deductions for AGI, which means they can be claimed even if the taxpayer does not itemize deductions.

Question 4

A theft loss of investment property is an itemized deduction not subject to the 2%-of-AGI floor.

Accepted Answer

This statement is true. Theft losses of investment property can be claimed as an itemized deduction on Schedule A of Form 1040 and are not subject to the 2%-of-AGI floor. However, there are limitations on the amount of the deduction based on the adjusted basis of the stolen property and the taxpayer's income.

Question 5

If an election is made to defer deduction of research expenditures, the amortization period is based on the expected life of the research project if less than 60 months.

Accepted Answer

The amortization period for deferred research expenditures is statutorily set at 60 months or more, starting with the midpoint of the tax year in which the expenditures are paid or incurred, and is not based on the expected life of the research project.

Question 6

The purpose of the "excess business loss" rules are to limit the amount of non-business income

Accepted Answer

The excess business loss rules are designed to limit the amount of non-business income that can be offset by business losses. This helps prevent taxpayers from using losses from one business or activity to reduce their tax liability on other types of income, such as wages, investments, or rental income. The rules were introduced as part of the Tax Cuts and Jobs Act of 2017 and generally apply to tax years beginning after December 31, 2017, and before January 1, 2026.

Question 7

A business theft loss is taken in the year of the theft.

Accepted Answer

The answer of A business theft loss is taken in...

Question 8

Beginning in 2018, a personal casualty loss deduction is only allowed for losses occurring in a Federally-declared disaster area.

Accepted Answer

As per the Tax Cuts and Jobs Act passed in 2017, starting from the tax year 2018, a personal casualty loss deduction can only be claimed for losses incurred in a Federally-declared disaster area.

Question 9

The amount of a loss on insured personal use property is reduced by the insurance coverage if no claim is made against the insurer.

Accepted Answer

If a loss occurs on insured personal use property but the policyholder chooses not to make a claim against the insurer, the amount of the loss is still reduced by the amount of insurance coverage. However, the policyholder would have to pay for the cost of the loss out of pocket since they opted not to file a claim.

Question 10

In 2017, Amos had AGI of $50,000. Amos also had a diamond ring stolen which cost $20,000 and was worth
$17,000 at the time of the theft. He itemized deductions on last year's tax return. In 2018, Amos recovered $17,000 from the insurance company. Therefore, he must include $11,900 in gross income on the tax return for the current year.

Accepted Answer

The answer of In 2017, Amos had AGI of $50,000....

Question 11

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

Accepted Answer

The amount of loss for partial destruction of business property is the cost of repairing or replacing the damaged property, not the decline in fair market value.

Question 12

In 2018, personal casualty gains are allowed to offset personal casualty losses. If an excess casualty loss results, it is not deductible unless attributable to a Federally-declared disaster).

Accepted Answer

In 2018, personal casualty gains are allowed to offset personal casualty losses. If an excess casualty loss results, it is not deductible unless attributable to a Federally-declared disaster.

Question 13

The cost of depreciable property is not a research and experimental expenditure.

Accepted Answer

Depreciable property refers to assets that lose their value over time and are subject to depreciation expense. Research and experimental expenditures, on the other hand, refer to costs incurred in developing or improving products or processes. The two concepts are distinct and should not be confused.

Question 14

When a nonbusiness casualty loss is spread between two taxable years, the loss in the second year is reduced by 10% of adjusted gross income for the first year.

Accepted Answer

Nonbusiness casualty losses are subject to a 10% of adjusted gross income (AGI) threshold before they can be deducted on a tax return. However, if the loss is spread between two taxable years, the loss in the second year is not automatically reduced by 10% of AGI from the first year. Instead, the taxpayer must recalculate the 10% threshold for the second year based on the adjusted gross income for that year.

Question 15

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.

Accepted Answer

If the insurance recovery for a theft is greater than the asset's fair market value but less than its adjusted basis, no gain is recognized. The recovery is limited to the adjusted basis of the stolen property, and any excess is treated as a nontaxable recovery of capital.

Question 16

Taxpayer's home was destroyed by a storm in the current year in a Federally-declared 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.

Accepted Answer

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 prior year, not the current year.

Question 17

If a non-corporate taxpayer has an "excess business loss" for the year, it is not allowed.

Accepted Answer

Non-corporate taxpayers are subject to the excess business loss limitation, which restricts the deduction of business losses if they exceed a certain amount. This limitation was introduced by the Tax Cuts and Jobs Act of 2017 and is in effect for tax years 2018 through 2025. If the taxpayer has an excess business loss, it is not allowed in the current year, but it may be carried forward to future years as a net operating loss (NOL).

Question 18

Research and experimental expenditures do not include the cost of consumer surveys.

Accepted Answer

The answer of Research and experimental expenditures do not include...

Question 19

The cost of repairs to damaged property is not an acceptable measure of the loss in value of the property.

Accepted Answer

The cost of repairs to damaged property is often used as a measure of the loss in value of the property, as it represents the financial amount required to bring the property back to its pre-damage condition.

Question 20

If investment property is stolen, the amount of the loss is the adjusted basis of the property at the time of the theft reduced by $100 and 10% of AGI.

Accepted Answer

The amount of the loss for stolen investment property is indeed the adjusted basis of the property at the time of the theft, but the reduction of $100 and 10% of AGI applies specifically to personal casualty and theft losses, not to investment or business property.

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