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

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Question 61

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Ralph is single and reports the following items for 2019: $\begin{array} { l r } \text { Nonbusiness capital gains } & \$ 9,000 \\\text { Nonbusiness capital losses } & ( 3,000 ) \\\text { Interest income } & 6,000 \\\text { Itemized deductions (none of the amount resulted from a casualty loss) } & ( 10,000 ) \end{array}$ In calculating Ralph's net operating loss and with respect to these amounts only, what amount must be added back to taxable income (loss) ?

A) $0
B) $200
C) $2,000
D) $3,000
E) None of these.

F) B) and D)
G) C) and E)

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Question 62

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

A) True
B) False

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Question 63

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A bona fide debt cannot arise on a loan between father and son.

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

Peggy is in the business of factoring accounts receivable.Last year, she purchased a $30,000 account receivable for $25,000.This year, the account was settled for $25,000.How much loss can Peggy deduct and in which year?

If a business debt previously deducted as partially worthless becomes totally worthless this year, only the amount not previously deducted can be deducted this year.

Gary, who is an employee of Red Corporation, reports the following items for 2019: $\begin{array} { l r } \text { Salary } & \$ 80,000 \\\text { Federal disaster area personal casualty gain } & 7,000 \\\text { Federal disaster area personal casualty loss from one event (before } & ( 15,000 ) \\\text { the } \$ 100 \text { floor) } & \\\text { Loss on rental property } & ( 6,000 ) \\\text { Theft of bonds } & ( 18,000 ) \\\text { Unreimbursed loss from theft of a computer used 100\% for business } & ( 4,000 )\end{array}$ Determine Gary's AGI and total amount of itemized deductions for 2019.

Last year, Lucy purchased a $100,000 account receivable for $90,000.During the current year, Lucy collected $97,000 on the account.What are the tax consequences to Lucy associated with the collection of the account receivable? No subsequent collections are expected.

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

Steve and Holly report the following items for 2019: $\begin{array} { l r } \text { Dividend income } & \$ 16,000 \\\text { Interest income } & 14,000 \\\text { Itemized deductions (none of the amount resulted from a casualty loss) } & ( 26,000 ) \\\text { Business capital gains } & 2,000 \\\text { Business capital losses } & ( 10,000 ) \end{array}$ In calculating their net operating loss, and with respect to the above amounts only, what amount must be added back to taxable income (loss) ?

A theft of investment property can create or increase a net operating loss for an individual.

Neal, single and age 37, reports the following items for 2019: $\begin{array}{lr}\text { Salary } & \$ 50,000 \\\text { Casualty loss on business property } & (8,000) \\\text { Casualty loss on rental property } & (5,000) \\\begin{array}{lr}\text { Federal disaster area personal casualty gains }\end{array} & 3,000 \\\begin{array}{l}\text { Federal disaster area personal casualty losses } \\\text { (after } \$ 100 \text { floor) }\end{array} & (12,000) \\\begin{array}{l}\text { Interest expense and taxes on personal } \\\text { residence }\end{array} & (11,700)\end{array}$ Determine Neal's taxable income for 2019.

Regarding research and experimental expenditures, which of the following are not qualified expenditures?