Question 1

How is qualified production activities income (QPAI) calculated?

Accepted Answer

QPAI is calculated as follows:

Question 2

In 2017,Wally had the following insured personal casualty losses (arising from one casualty).Wally also had $42,000 AGI for the year before considering the casualty.
Wally's casualty loss deduction is:

Accepted Answer

A) $1,500. 
B) $1,600. 
C) $4,800. 
D) $58,000. 
E) None of the above. 
A) $1,500. 
B) $1,600. 
C) $4,800. 
D) $58,000. 
E) None of the above.

Question 3

John had adjusted gross income of $60,000.During the year his personal use summer home was damaged by a fire.Pertinent data with respect to the home follows:
​
 
John had an accident with his personal use car.As a result of the accident,John was cited with reckless driving and willful negligence.Pertinent data with respect to the car follows:
​
 
What is John's itemized casualty loss deduction?

Accepted Answer

A) $0 
B) $2,000 
C) $17,000 
D) $18,000 
E) None of the above 
A) $0 
B) $2,000 
C) $17,000 
D) $18,000 
E) None of the above

Question 4

A theft loss is taken in the year of the theft.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Five years ago,Tom loaned his son John $20,000 to start a business.A note was executed with an interest rate of 8%,which is the Federal rate.The note required monthly payments of the interest with the $20,000 due at the end of ten years.John always made the interest payments until last year.During the current year,John notified his father that he was bankrupt and would not be able to repay the $20,000 or the accrued interest of $1,800.Tom is an accrual basis taxpayer whose only income is salary and interest income.The proper treatment for the nonpayment of the note is:

Accepted Answer

A) No deduction. 
B) $3,000 deduction. 
C) $20,000 deduction. 
D) $21,800 deduction. 
E) None of the above. 
A) No deduction. 
B) $3,000 deduction. 
C) $20,000 deduction. 
D) $21,800 deduction. 
E) None of the above.

Question 7

Discuss the tax treatment of non-reimbursed losses of an employee in connection with a trade or business.

Accepted Answer

The loss is deductible from ad

Question 8

Sally is an employee of Blue Corporation.Last year,she purchased a very expensive computer with her own funds.She used the computer 100% for business purposes.During the current year,the computer was completely destroyed in a fire.Blue Corporation did not reimburse her for her loss.Discuss whether Sally's loss will create or increase Sally's net operating loss.

Accepted Answer

The loss is incurred in connection with

Question 9

In determining whether a debt is a business or nonbusiness bad debt,the debtor's use of the borrowed funds is important.

Accepted Answer

A) True 
 B)False

Question 10

Susan has the following items for 2017:
∙ Loss on rental property caused by termites-$110,000.Insurance covered 80% of the loss.
∙ Loss on personal use automobile-$10,000.The insurance policy does not cover the first $3,000 of loss.Susan decided not to file a claim for the loss.
∙ Loss on a painting stolen from Susan's house.Susan purchased the painting three years ago as an investment.She paid $40,000 for the painting and it was worth $35,000 at the time of the theft.The painting was insured for the fair market value.
∙ Salary-$40,000.
Determine Susan's AGI and total amount of itemized deductions for 2017.

Accepted Answer

The answer of Susan has the following items for 2017:
∙...

Question 11

Discuss the treatment,including the carryback and carryforward periods,of casualty losses incurred with personal use property.

Accepted Answer

These losses are subject to the $100 per

Question 12

Three years ago,Sharon loaned her sister $30,000 to buy a car.A note was issued for the loan with the provision for monthly payments of principal and interest.Last year,Sharon purchased a car from the same dealer,Hank's Auto.As partial payment for the car,the dealer accepted the note from Sharon's sister.At the time Sharon purchased the car,the note had a balance of $18,000.During the current year,Sharon's sister died.Hank's Auto was notified that no further payments on the note would be received.At the time of the notification,the note had a balance due of $15,500.What is the amount of loss,with respect to the note,that Hank's Auto may claim on the current year tax return?

Accepted Answer

A) $0 
B) $3,000 
C) $15,500 
D) $18,000 
E) None of the above 
A) $0 
B) $3,000 
C) $15,500 
D) $18,000 
E) None of the above

Question 13

John files a return as a single taxpayer.In 2017,he had the following items:
Determine John's AGI for 2017.

Accepted Answer

A) ($5,000). 
B) $0. 
C) $45,000. 
D) $51,000. 
E) None of the above. 
A) ($5,000). 
B) $0. 
C) $45,000. 
D) $51,000. 
E) None of the above.

Question 14

Ivory,Inc.,has taxable income of $600,000 and qualified production activities income (QPAI) of $700,000 in the current year.Ivory's domestic production activities deduction is:

Accepted Answer

A) $36,000. 
B) $42,000. 
C) $54,000. 
D) $63,000. 
E) None of the above. 
A) $36,000. 
B) $42,000. 
C) $54,000. 
D) $63,000. 
E) None of the above.

Question 15

The amount of a business loss cannot exceed the amount of the taxpayer's NOL for the taxable year.

Accepted Answer

A) True 
 B)False

Question 16

A nonbusiness bad debt can offset an unlimited amount of long-term capital gain.

Accepted Answer

A) True 
 B)False

Question 17

A taxpayer can carry any NOL incurred forward up to 20 years.

Accepted Answer

A) True 
 B)False

Question 18

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?

Accepted Answer

A) $0 
B) $2,000 
C) $3,000 
D) $5,000 
E) None of the above 
A) $0 
B) $2,000 
C) $3,000 
D) $5,000 
E) None of the above

Question 19

A bond held by an investor that is uncollectible will be treated as a worthless security and hence,produce a capital loss.

Accepted Answer

A) True 
 B)False

Question 20

Last year,taxpayer had a $10,000 nonbusiness bad debt.Taxpayer also had an $8,000 short-term capital gain and taxable income of $35,000.If taxpayer collects the entire $10,000 during the current year,$8,000 needs to be included in gross income.

Accepted Answer

A) True 
 B)False

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

How is qualified production activities income (QPAI) calculated?

In 2017,Wally had the following insured personal casualty losses (arising from one casualty).Wally also had $42,000 AGI for the year before considering the casualty. Wally's casualty loss deduction is:

A theft loss is taken in the year of the theft.

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

Discuss the tax treatment of non-reimbursed losses of an employee in connection with a trade or business.

In determining whether a debt is a business or nonbusiness bad debt,the debtor's use of the borrowed funds is important.

Discuss the treatment,including the carryback and carryforward periods,of casualty losses incurred with personal use property.

John files a return as a single taxpayer.In 2017,he had the following items: Determine John's AGI for 2017.

Ivory,Inc.,has taxable income of $600,000 and qualified production activities income (QPAI) of $700,000 in the current year.Ivory's domestic production activities deduction is:

The amount of a business loss cannot exceed the amount of the taxpayer's NOL for the taxable year.

A nonbusiness bad debt can offset an unlimited amount of long-term capital gain.

A taxpayer can carry any NOL incurred forward up to 20 years.

A bond held by an investor that is uncollectible will be treated as a worthless security and hence,produce a capital loss.

Last year,taxpayer had a $10,000 nonbusiness bad debt.Taxpayer also had an $8,000 short-term capital gain and taxable income of $35,000.If taxpayer collects the entire $10,000 during the current year,$8,000 needs to be included in gross income.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Depreciation, cost Recovery, amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, basis Considerations, and Nontaxable Exchanges

Property Transactions, capital Gains and Losses, sec1231, and Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganization

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

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