Chapter 7 Quizes

Chapter 7 Quizes - Marks: 0/1 A business bad debt can...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Marks: 0/1 A business bad debt can offset an unlimited amount of capital gain with any excess nonbusiness bad debt then offsetting ordinary income. Choose one answer. a. True b. False Correct. A business bad debt is classified as an ordinary deduction. p. 7-5 The nonbusiness bad debt provisions are not applicable to corporations. Choose one answer. a. True Correct. p. 7-5 b. False Marks: 0/1 In determining whether a debt is a business or nonbusiness bad debt, the debtor's use of the borrowed funds is important. Choose one answer. a. True b. False Correct. The use of the funds by the debtor is of no consequence in making the determination. The determination is made at the creditor level. pp. 7-4 and 7-5 Question 4 Marks: 0/1 Two years ago, Green Corporation, an accrual basis taxpayer, sold merchandise on credit to John, an individual. Green's account receivable from John was $20,000. Last year, John filed for bankruptcy, and Green was notified that it could expect to receive 20 cents on the dollar. Accordingly, Green took a $16,000 bad debt deduction on last year's tax return. In June of the current year, Green received a $6,000 payment from John in final settlement of the debt. How should Green account for the payment in the current year? Choose one answer. a. File an amended tax return for last year. b. Report no income for the current year. c. Report $2,000 of income for the current year. Correct.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
d. Report $4,000 of income for the current year. e. Report $6,000 of income for the current year. Green should report $2,000 ($6,000 - $4,000) of income in the current year. p. 7-4 Marks: 0/1 Amos loaned James (a friend) $10,000 in 2006 with the agreement that the loan would be repaid in two years. In 2007, James filed for bankruptcy, and Amos was notified that he could expect $0.40 on the dollar. In 2008, final settlement was made, and Amos received $1,500. In 2007, Amos had AGI of $70,000, including $6,000 of short-term capital gain. In 2008, Amos had AGI of $80,000, including $4,000 of long-term capital gain. Assuming the loan is a nonbusiness bad debt, what is the amount available for Amos's bad debt deduction in 2008? Choose one answer.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 8

Chapter 7 Quizes - Marks: 0/1 A business bad debt can...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online