Tax quiz 7

| July 29, 2018

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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.

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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.

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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.

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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.

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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?





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.





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?





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

Unreimbursed loss from theft of business computer

Personal casualty gain

Personal casualty loss (after $100 floor)

Determine the amount of Theo’s itemized deduction from these





None of the above.

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