Question 1

Match each statement with the correct term below.
-Capital loss

Accepted Answer

A) Limited to $3,000 annually for individuals. 
B) When an asset is disposed of for less than its basis. 
C) An excess of business deductions over business income. 
D) A trade or business in which the taxpayer is not a material participant. 
E) A loss that results from some sudden, unexpected, or unusual event.
F)Any asset that is not a receivable, inventory, or depreciable or real property used in a trade or business. 
A) Limited to $3,000 annually for individuals. 
B) When an asset is disposed of for less than its basis. 
C) An excess of business deductions over business income. 
D) A trade or business in which the taxpayer is not a material participant. 
E) A loss that results from some sudden, unexpected, or unusual event.
F)Any asset that is not a receivable, inventory, or depreciable or real property used in a trade or business.

Question 2

Samantha sells the following assets and realizes the following gains (losses)during the current year:   ​
As a result of these sales,Samantha's adjusted gross income will:

Accepted Answer

A) Increase by $5,000. 
B) Increase by $10,400. 
C) Increase by $11,000. 
D) Increase by $13,000. 
E) Decrease by $ 600. 
A) Increase by $5,000. 
B) Increase by $10,400. 
C) Increase by $11,000. 
D) Increase by $13,000. 
E) Decrease by $ 600.

Question 3

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?

Accepted Answer

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

Question 4

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?

Accepted Answer

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

Question 5

Hamlet,a calendar year taxpayer,owns 1,000 shares of Vanity Corporation common stock,which he purchased two years ago for $4,000.Hamlet sells all of his shares on December 29,2016,for $2,500.On January 23,2017,he purchases 600 shares of Vanity Corporation common stock.What is the amount of Hamlet's recognized loss in 2016?

Accepted Answer

A) $- 0 - 
B) $600 
C) $900 
D) $1,500 
E) $4,000 
A) $- 0 - 
B) $600 
C) $900 
D) $1,500 
E) $4,000

Question 6

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

Accepted Answer

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

Question 7

Match each statement with the correct term below.
-Passive activity

Accepted Answer

A) Limited to $3,000 annually for individuals. 
B) When an asset is disposed of for less than its basis. 
C) An excess of business deductions over business income. 
D) A trade or business in which the taxpayer is not a material participant. 
E) A loss that results from some sudden, unexpected, or unusual event.
F)Any asset that is not a receivable, inventory, or depreciable or real property used in a trade or business. 
A) Limited to $3,000 annually for individuals. 
B) When an asset is disposed of for less than its basis. 
C) An excess of business deductions over business income. 
D) A trade or business in which the taxpayer is not a material participant. 
E) A loss that results from some sudden, unexpected, or unusual event.
F)Any asset that is not a receivable, inventory, or depreciable or real property used in a trade or business.

Question 8

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.
​

Accepted Answer

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

Question 9

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.

Accepted Answer

A) True 
 B)False

Question 10

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.
​

Accepted Answer

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

Question 11

During the year,Shipra's apartment is burglarized and her TV and stereo are taken.Her basis in the TV is $1,200 and it has a fair market value of $700.Her basis in the stereo is $400 and it has a fair market value of $600.What is Shipra's theft loss deduction (before considering the annual limitation based upon AGI)?

Accepted Answer

A) $- 0 - 
B) $900 
C) $1,000 
D) $1,200 
E) $1,300 
A) $- 0 - 
B) $900 
C) $1,000 
D) $1,200 
E) $1,300

Question 12

Gloria owns 750 shares of the Greene Company that she acquired in 2008 for $9,000.On June 12 of the current year,she sells 500 shares of Greene for $4,000.Two weeks later on June 26,Gloria purchases 200 shares of Greene for $2,200.What are the effects of the June 12 sale? Explain.

Accepted Answer

The sale of the 500 shares results in a

Question 13

Match each statement with the correct term below.
-Business casualty loss

Accepted Answer

A) A loss that is generally not deductible. 
B) The borrower is personally liable for the debt. 
C) The loss is used to offset income in future periods. 
D) A liability that is only secured by the underlying property. 
E) The loss may be used to offset income from prior periods.
F)A type of stock that receives some ordinary loss treatment.
G)Involved in a rental activity for more than 500 hours in a year.
H)Cash or other assets contributed plus recourse debts of the activity.
I)Owns at least a 10% interest and is significantly involved in the rental activity.
J)The amount of the loss for fully destroyed property is the property's adjusted basis.
K)The amount of loss is limited to the lower of the property's adjusted basis, or the reduction in fair market value.
L)Management is left to at least one general partner whose liability is not limited and who is responsible for the on-going activities of the business. 
A) A loss that is generally not deductible. 
B) The borrower is personally liable for the debt. 
C) The loss is used to offset income in future periods. 
D) A liability that is only secured by the underlying property. 
E) The loss may be used to offset income from prior periods.
F)A type of stock that receives some ordinary loss treatment.
G)Involved in a rental activity for more than 500 hours in a year.
H)Cash or other assets contributed plus recourse debts of the activity.
I)Owns at least a 10% interest and is significantly involved in the rental activity.
J)The amount of the loss for fully destroyed property is the property's adjusted basis.
K)The amount of loss is limited to the lower of the property's adjusted basis, or the reduction in fair market value.
L)Management is left to at least one general partner whose liability is not limited and who is responsible for the on-going activities of the business.

Question 14

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?

Accepted Answer

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

Question 15

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?

Accepted Answer

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

Question 16

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.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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.
​

Accepted Answer

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

Question 19

Match each statement with the correct term below.
-Casualty loss

Accepted Answer

A) Limited to $3,000 annually for individuals. 
B) When an asset is disposed of for less than its basis. 
C) An excess of business deductions over business income. 
D) A trade or business in which the taxpayer is not a material participant. 
E) A loss that results from some sudden, unexpected, or unusual event.
F)Any asset that is not a receivable, inventory, or depreciable or real property used in a trade or business. 
A) Limited to $3,000 annually for individuals. 
B) When an asset is disposed of for less than its basis. 
C) An excess of business deductions over business income. 
D) A trade or business in which the taxpayer is not a material participant. 
E) A loss that results from some sudden, unexpected, or unusual event.
F)Any asset that is not a receivable, inventory, or depreciable or real property used in a trade or business.

Question 20

Sylvia owns 1,000 shares of Sidney Sails,Inc.,for which she paid $18,000 several years ago.On March 15,she purchases 400 additional shares for $5,000.Sylvia sells the original 1,000 shares for $13,500 on April 1.These are her only stock transactions during the year.Sylvia's capital loss deduction for the current year and her basis in the new shares are:
​
​

Accepted Answer

The answer of Sylvia owns 1,000 shares of Sidney Sails,Inc.,for...

Match each statement with the correct term below. -Capital loss

Samantha sells the following assets and realizes the following gains (losses)during the current year: As a result of these sales,Samantha's adjusted gross income will:

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?

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?

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

Match each statement with the correct term below. -Passive activity

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.

Gloria owns 750 shares of the Greene Company that she acquired in 2008 for $9,000.On June 12 of the current year,she sells 500 shares of Greene for $4,000.Two weeks later on June 26,Gloria purchases 200 shares of Greene for $2,200.What are the effects of the June 12 sale? Explain.

Match each statement with the correct term below. -Business casualty loss

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?

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?

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.

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

Match each statement with the correct term below. -Casualty loss

Federal Income Taxation-An Overview

Income Tax Concepts

Income Sources

Income Exclusions

Introduction to Business Expenses

Business Expenses

Taxation of Individuals

Acquisitions of Property

Cost Recovery on Property: Depreciation, depletion, and Amortization

Property Dispositions

Non-Recognition Transactions

Choice of Business Entity-General Tax and Nontax Factorsformation

Choice of Business Entity-Operations and Distributions

Choice of Business Entity-Other Considerations

Tax Research

Filters

Exam 7: Losses-Deductions and Limitations

Match each statement with the correct term below. -Capital loss

Samantha sells the following assets and realizes the following gains (losses)during the current year: ​ As a result of these sales,Samantha's adjusted gross income will:

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?

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?

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

Match each statement with the correct term below. -Passive activity

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.

Gloria owns 750 shares of the Greene Company that she acquired in 2008 for $9,000.On June 12 of the current year,she sells 500 shares of Greene for $4,000.Two weeks later on June 26,Gloria purchases 200 shares of Greene for $2,200.What are the effects of the June 12 sale? Explain.

Match each statement with the correct term below. -Business casualty loss

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?

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?

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.

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

Match each statement with the correct term below. -Casualty loss

Federal Income Taxation-An Overview

Income Tax Concepts

Income Sources

Income Exclusions

Introduction to Business Expenses

Business Expenses

Taxation of Individuals

Acquisitions of Property

Cost Recovery on Property: Depreciation, depletion, and Amortization

Property Dispositions

Non-Recognition Transactions

Choice of Business Entity-General Tax and Nontax Factorsformation

Choice of Business Entity-Operations and Distributions

Choice of Business Entity-Other Considerations

Tax Research

Filters

Samantha sells the following assets and realizes the following gains (losses)during the current year: As a result of these sales,Samantha's adjusted gross income will:

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?

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?