sm06 - CHAPTER 6 DEDUCTIONS AND LOSSES CERTAIN BUSINESS...

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CHAPTER 6 DEDUCTIONS AND LOSSES: CERTAIN BUSINESS EXPENSES AND LOSSES SOLUTIONS TO PROBLEM MATERIALS Status: Q/P Question/ Present in Prior Problem Topic Edition Edition 1 Bad debts: cash basis taxpayer New 2 Bad debts: partial worthlessness Unchanged 2 3 Bad debts: worthlessness New 4 Bad debts: recovery Unchanged 3 5 Bad debts: business versus nonbusiness Unchanged 4 6 Bad debts: loan versus gift Unchanged 5 7 Worthless securities Unchanged 7 8 § 1244 stock Unchanged 8 9 Issue recognition Unchanged 9 10 Business loss Unchanged 10 11 Theft loss Unchanged 11 12 Casualty: reimbursement Unchanged 12 13 Casualty loss: disaster area Unchanged 13 14 Business losses New 15 Casualty loss: insurance claim Unchanged 15 16 Casualty loss: cost of repairs method Unchanged 16 17 Casualty loss: $100 floor Unchanged 17 18 Casualty loss: deduction for versus from Unchanged 18 19 Casualty loss: 10% of AGI floor Unchanged 19 20 Issue recognition Unchanged 20 21 Issue recognition Unchanged 21 22 Research expenditures Unchanged 22 23 Research expenditures New 24 Issue recognition Unchanged 24 25 Net operating loss: carryback and carryforward Unchanged 25 26 Bad debts: nonbusiness Unchanged 26 27 Bad debts: tax benefit rule Unchanged 27 6-1
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6-2 2002 Comprehensive Volume/Solutions Manual Status: Q/P Question/ Present in Prior Problem Topic Edition Edition 28 Bad debts: business New * 29 Bad debt and § 1244 stock Unchanged 29 30 § 1244 stock Unchanged 30 * 31 Casualty loss: $100 and 10% of AGI floors Unchanged 31 * 32 Casualty loss: disaster area loss Modified 32 * 33 Casualty loss: business versus New personal use property * 34 Casualty loss: insurance recovery Unchanged 34 * 35 Research expenditures Modified 35 * 36 Net operating loss: absent Unchanged 36 * 37 Net operating loss and personal casualty gain Unchanged 37 * 38 Cumulative Modified 38 * 39 Cumulative Unchanged 39 *The solution to this problem is available on a transparency master.
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Deductions and Losses: Business 6-3 CHECK FIGURES 26. No deduction allowed currently. 27. $4,000 STCL in 2000 with $3,000 deducted; $3,000 included in gross income in 2001. 28. $72,000 bad debt deduction. 29. $47,000. 30. Mary should sell half each year. 31. $-0-. 32. $60,000 loss should be taken currently. 33. $8,000 deduction for AGI; $200 itemized deduction. 34. Deductible loss $400 in either situation. 35.a. 2001 $315,000; 2002 $427,000; 2003 $0. 35.b. 2001 $0; 2002 $0; 2003 $98,936. 36. $36,000. 37. $43,000. 38. Refund due $40,000. 39. Refund due for 2000 $781.
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6-4 2002 Comprehensive Volume/Solutions Manual DISCUSSION QUESTIONS 1. No deduction is allowed for the bad debts of a cash basis taxpayer because no income has been reported. p. 6-3 2. Partial worthlessness of a business bad debt gives rise to a deduction at that time; or the taxpayer can delay the deduction until the business bad debt is wholly worthless. A bad debt deduction cannot be taken when a nonbusiness bad debt is partially worthless. The deduction is taken only when the debt becomes wholly worthless. p. 6-4
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sm06 - CHAPTER 6 DEDUCTIONS AND LOSSES CERTAIN BUSINESS...

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