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Chapter 7 ICE with solutions_1

# Chapter 7 ICE with solutions_1 - Stewart Tax 1 Chapter 7...

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Stewart – Tax 1 – Chapter 7 1 Net Operating Loss Example Carryback or carryover 2011 NOL??? ABC Corporation has taxable income as follows: 2008 2009 2010 2011 NOL 2012 Projected T. Income \$25,000 \$15,000 \$20,000 \$(50,000) \$50,000 MTR? 15% 15% 15% N/A 15% Carryback 0 (15,000) (20,000) (15,000) Amended T. I. \$ 0 \$ 0 35,000 Total Refund (In tax) \$2,250 \$3,000 \$2,250 = \$7,500 Change: 2008 2009 2010 2011 NOL 2012 Projected T. I. \$25,000 \$15,000 \$20,000 \$(50,000) \$95,000 MTR? 15% 15% 15% N/A 15-34% Forego carry-back : Tax on \$45,000 Tax on 95,000 (95k-55k) Tax Savings in 2012 \$20,550 \$6,750 \$13,800

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Stewart – Tax 1 – Chapter 7 2 Personal Casualty Loss Example Joe totals his personal use car which cost him \$25,000 five years ago and is worth \$10,000 at the time of the accident. He had a racing bike on his car (also totaled) which he had recently purchased for \$2,000 but was actually worth \$3,000. He was underinsured and his insurance recovery was \$8,000 for his car and nothing for his bike. His AGI is \$30,000. Casualty loss Gross FMV Adjusted Basis Loss (Insurance Recovery) Net Loss Car \$10,000 \$25,000 10,000 \$8,000 \$2,000 Bike \$3,000 \$ 2,000 2,000 0 2,000 Total: 4,000 Personal per occurrence reduction (100) 10% of AGI limitation (3,000) Net deduction \$ 900 Where deducted? Personal loss = misc. I.D. (not subject to 2% of AGI Limit)
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