Comp SM_Ch07 - CHAPTER 7 DEDUCTIONS AND LOSSES: CERTAIN...

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CHAPTER 7 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 Unchanged 1 2 Bad debts: business versus nonbusiness New 3 Bad debts: worthlessness Unchanged 3 4 Bad debts: recovery Unchanged 4 5 Bad debts: nonbusiness for corporations Unchanged 5 6 Bad debts: related party Unchanged 6 7 Worthless securities New 8 Section 1244 stock Unchanged 8 9 Issue ID Unchanged 9 10 Casualty loss: definition New 11 Theft loss Unchanged 11 12 Casualty loss: personal casulty loss and multiple years Unchanged 12 13 Casualty loss: disaster area Unchanged 13 14 Casualty loss: measurement rule for partial destruction and complete destruction Unchanged 14 15 Casualty loss: insurance claim Unchanged 15 16 Casualty loss: cost of repairs method Unchanged 16 17 Casualty loss: 10% of AGI floor Unchanged 17 18 Casualty loss: miscellaneous itemized deductions New 19 Casualty loss: 10% of AGI floor Unchanged 19 20 Issue ID Unchanged 20 21 Issue ID New 22 Research expenditures Unchanged 22 23 Research expenditures Unchanged 23 24 Issue ID Unchanged 24 7-1
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7-2 2005 Comprehensive Volume/Solutions Manual Status: Q/P Question/ Present in Prior Problem Topic Edition Edition 25 Net operating loss: carryback and carryforward Unchanged 25 26 Bad debts: business Unchanged 26 27 Bad debts: nonbusiness Unchanged 27 28 Bad debts: business New * 29 Bad debt and § 1244 stock Unchanged 29 * 30 Section 1244 stock Unchanged 30 * 31 Casualty loss: personal New * 32 Casualty loss: disaster area loss Modified 32 * 33 Casualty loss: business versus personal use property Unchanged 33 * 34 Casualty loss: insurance recovery Unchanged 34 * 35 Research expenditures Unchanged 35 * 36 Net operating loss: absent Unchanged 36 * 37 Net operating loss and personal casualty gain Unchanged 37 * 38 Cumulative Modified 38 * 39 Cumulative Modified 39 Research Problem 1 Bad debts Unchanged 2 Theft loss New 3 Internet activity Unchanged *The solution to this problem is available on a transparency master.
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Deductions and Losses: Certain Business Expenses and Losses 7-3 CHECK FIGURES 26. $26,000 in current year. 27. $5,000 STCL in 2004 with $3,000 deducted; $0 deducted in 2003. 28. $72,000 bad debt deduction. 29. $103,000. 30. Mary should sell half each year. 31. $44,900. 32. $60,000 loss should be taken currently. 33. AGI of $105,000; $39,400 itemized deduction. 34. Net cash benefit of $7,800 of filing an insurance claim. 35.a. 2004 $353,000; 2005 $422,000; 2006 $0. 35.b. 2004 $0; 2005 $0; 2006 $77,502. 36. $36,000. 37. $43,000. 38. Refund due for 2004 $11,125. 39. Refund due for 2003 $921.
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7-4 2005 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. 7-3 2. Ron has a nonbusiness bad debt. The debt is unrelated to Ron’s trade or business. The use to which the borrowed funds are put is of no consequence in classifying the bad debt as a nonbusiness bad debt. pp. 7-4 and 7-5 3. A legal action need not be initiated against the debtor, but all of the surrounding facts and circumstances must indicate that such an action would not result in a collection of the debt. p. 7-4 4.
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This note was uploaded on 03/14/2010 for the course ACC 11101 taught by Professor Sun during the Spring '10 term at Abraham Baldwin Agricultural College.

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Comp SM_Ch07 - CHAPTER 7 DEDUCTIONS AND LOSSES: CERTAIN...

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