Question 1

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 only the person who has legal ownership of the property can claim a loss on it.

Question 2

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 insurance recovery is included in gross income because Amos previously deducted the loss on his tax return.

Question 3

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 4

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

Accepted Answer

Starting in 2018, a personal casualty loss deduction is only allowed for losses that occur in a Federally-declared disaster area, according to the Tax Cuts and Jobs Act.

Question 5

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

Accepted Answer

Under the Tax Cuts and Jobs Act, non-corporate taxpayers are not allowed to deduct an "excess business loss" for the year. The excess amount is carried forward to future years as a net operating loss.

Question 6

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.

Question 7

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

This statement is true according to the tax laws for 2018. Personal casualty gains can offset personal casualty losses, but if the losses exceed the gains, the excess loss is not deductible unless it is attributable to a Federally-declared disaster.

Question 8

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 9

Losses on rental property are classified as deductions for AGI.

Accepted Answer

Losses on rental property are classified as deductions for AGI, meaning they can be used to reduce your overall taxable income.

Question 10

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 11

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

Accepted Answer

According to the IRS, if personal casualty gains exceed personal casualty losses (after deducting the $100 floor), there is no itemized deduction.

Question 12

The purpose of the "excess business loss" rules are to limit the amount of non-business income (e.g., salaries, interest, dividends, etc.) that can be "sheltered" from tax as a result of business losses.

Accepted Answer

The "excess business loss" rules were introduced as part of the Tax Cuts and Jobs Act (TCJA) in 2017 and are designed to prevent taxpayers from using business losses to offset non-business income and reduce their tax liability. The rules apply to non-corporate taxpayers, such as individuals, trusts, and estates, and limit the amount of business losses that can be deducted in a given year. Any excess business losses are carried forward and treated as a net operating loss (NOL) that can be used to offset future business income.

Question 13

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

Accepted Answer

Depreciable property refers to physical assets that lose value over time due to wear and tear or obsolescence. It is not an expense related to research and experimentation, which refers to costs incurred in developing new products, processes, or technologies. Therefore, the cost of depreciable property is not considered a research and experimental expenditure.

Question 14

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 15

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

This statement is true. If there is insurance coverage on personal use property and no claim is made against the insurer for a loss, then the amount of that loss is reduced by the coverage provided by the insurance policy.

Question 16

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 17

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, the 10%-of-AGI reduction will be based on the AGI of the prior year, not the current year.

Question 18

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 19

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 repair or replacement of the damaged property, not the decline in fair market value.

Question 20

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

Accepted Answer

A theft loss of investment property is considered a casualty loss and is not subject to the 2%-of-AGI floor for itemized deductions.

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