Exam 7: Losses-Deductions and Limitations

Ford's automobile that he uses 100% for business is vandalized.The adjusted basis before the vandalism is $3,000.The fair market value of the car before the vandalism is $7,000,and the fair market value of the property after the vandalism is $2,000.Ford's insurance does not cover vandalism.What is Ford's loss deduction for the year?

Carmen purchased a business for $150,000 by investing $40,000 of her own funds and borrowing $110,000 from Local National Bank.Carmen signed the note payable as a personal guarantor.In the first year of operations the business had an operating loss of $120,000.During the second year,the business has an operating loss of $45,000.How much of the year two loss is deductible against Carmen's income from other business activities? Assume that Carmen materially participates in the business.

Match each statement with the correct term below. -Material participant

For each of the following situations,determine whether the item is deductible,and discuss any limitations,which might be placed on the deduction. a.Carl owns an office building that he rents out to various businesses. During the current year, rental income from the building is $95,000. Carl's allowable expenses relating to the office building are $150,000. b.Edward sells stock to an unrelated party at a $70,000 loss during the current year. c.Lee sold furniture at a loss of $5,000 during the current year.

Jennifer's business storage shed is damaged by a hail storm.The shed is uninsured.Its adjusted basis is $8,000.Just before the accident the shed is appraised for $10,000.In its damaged condition,the shed can be sold for $4,000.What is Jennifer's loss from the storm?

The Corinth Corporation is incorporated in 2013 and had no capital asset transactions during the year.From 2013 through 2016,the company had the following capital gains and losses: ​ If Corinth's marginal tax rate during each of these years is 34%,what is the effect of Corinth's capital gains and losses on the amount of tax due each year?

If a corporation incurs a net operating loss,what would cause it to elect to carry the loss forward and forsake the carryback? Explain.