ch. 7 solutions

West Federal Taxation 2008: Individual Income Taxes, Professional Version (West's Federal Taxation: Individual Income Taxes)

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Chapter 7 34. The bad debt is a business bad debt. However, the amount of Ron’s bad debt is limited to Ron’s basis in the debt. Therefore, the bad debt of $80,000 (80% × $100,000 face value of the receivable) is limited to a deduction of $72,000 for Ron; that is, his basis in the debt. p. 7-3 37. Since these losses are attributable to personal use assets, the lower of the adjusted basis or the decline in value is used in calculating the amount of the casualty. If these were business assets, the ‘‘lower of ’’ provision would still apply because the assets are not completely destroyed. Casualty loss from fire Home ($200,000 adjusted basis – $150,000 insurance proceeds) ($ 50,000) Contents [($80,000 – $50,000) value decline – $10,000 insurance proceeds] (20,000) Total loss ($ 70,000) Less: $100 floor 100 ($69,900) Casualty loss from accident Car ($ 25,000) Less: $100 floor 100 (24,900) Total ($94,800) Less: 10% of AGI (10% × $90,000) 9,000
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ch. 7 solutions - Chapter 7 34. The bad debt is a business...

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