his way to deliver merchandise ordered by his customer when another driver lost control over his truck and rammed it against the truck of Mr. Ventura. As a result, Ventura sustained injuries, his truck was severely damaged, and all the merchandise were destroyed. Negotiations with other party went smoothly and Mr. Ventura was paid the total amount of P3,150,000 for the following: Repair and replacement of truck parts P900,000 Total selling price of merchandise destroyed (at P1,000,000 cost) 1,700,000 Hospitalization and medical expenses for injuries sustained 300,000

his way to deliver merchandise ordered by his customer when another driver lost control over his truck and rammed it against the truck of Mr. Ventura. As a result, Ventura sustained injuries, his truck was severely damaged, and all the merchandise were destroyed. Negotiations with other party went smoothly and Mr. Ventura was paid the total amount of P3,150,000 for the following: Repair and replacement of truck parts P900,000 Total selling price of merchandise destroyed (at P1,000,000 cost) 1,700,000 Hospitalization and medical expenses for injuries sustained 300,000

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter12: Nonrecognition Transactions

Section: Chapter Questions

Problem 29P

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Mr. Ventura was on his way to deliver merchandise ordered by his customer when another driver lost control over his truck and rammed it against the truck of Mr. Ventura. As a result, Ventura sustained injuries, his truck was severely damaged, and all the merchandise were destroyed. Negotiations with the other party went smoothly and Mr. Ventura was paid the total amount of P3,150,000 for the following: Repair and replacement of truck parts Total selling price of merchandise destroyed (at P1,000,000 cost) Hospitalization and medical expenses for injuries sustained Reimbursement for other expenses incurred in relation to the incident P900,000 1,700,000 300,000 250,000 Total P3,150,000 How much of the above is gross income of Mr. Ventura for taxation purposes? a. P3,150,000 b. P1,950,000 c. P1,700,000 d. P700,000
The Goodson Company is a chain of retail electronics stores. How much of a loss can Goodson deduct in each of the following cases? Explain. a. An employee drops a 65-inch 3D television, cracking the plastic casing on the back. The television normally sells for 3,300. The cost of the set is 2,400, and Goodson sells the damaged set for 1,500. b. The company replaces its inventory system. The old system cost 45,000 and has a basis of 16,000. The company sells the old system for 7,500. The new system costs 75,000. c. A flood damages one of Goodsons retail stores. The building suffers extensive water damage. The basis of the building is 60,000, and the cost of repairing the damage is 72,000. The insurance company reimburses Goodson 50,000. d. The owner of Goodson sells a complete home entertainment center (e.g., projection TV, DVD, stereo system) to his sister for 7,000. The usual sales price is 8,500. The system costs 6,300. e. Assume the same facts as in part d, except that the owner sells the home entertainment center to his sister for 5,500. f. The owner of Goodson finds that the controller has embezzled 10,000 from the company. Before the owner can confront the controller, the controller leaves town and cannot be found. g. Upon arriving at the companys headquarters, the vice president of sales finds that someone has broken in and stolen three computers. The damage to the outside door is extensive. The cost of repairing the door is 1,500, and the cost of replacing the three computers is 9,500. The original cost of the computers totals 10,500. Goodsons basis in the computers is 5,000. The thieves also stole 350 from the petty cash fund. Goodson files a claim with its insurance company and receives 4,800.
Wildhorse Inc. recently replaced a piece of automatic equipment at a net price of $5,360, f.o.b. factory. The replacement was necessary because one of Wildhorse’s employees had accidentally backed his truck into Wildhorse’s original equipment and made it inoperable. Because of the accident, the equipment had no resale value to anyone and had to be scrapped. Wildhorse’s insurance policy provided for a replacement of its equipment and paid the price of the new equipment directly to the new equipment manufacturer, minus the deductible amount paid to the manufacturer by Wildhorse. The $5,360 that Wildhorse paid was the amount of the deductible that it has to pay on any single claim on its insurance policy. The new equipment represents the same value in use to Wildhorse. The used equipment had originally cost $64,800. It had a book value of $48,000 at the time of the accident and a second-hand market value of $55,020 before the accident, based on recent transactions involving similar…
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