15. In 2016, Tom loaned his friend Janelle $5,000 to invest in various stocks. Janelle signed a note to repay the principal with interest. In 2017, the stockmarket plunged and Janelle incurred large losses. In late 2017, Janelle declared personal bankruptcy and Tom was unable to collect any of the loan. Tomhad no other gains or losses in 2016 or 2017. His income from wages in both 2016 and 2017 was $50,000. The result is: a. Tom deducts a business bad debtof $5,000 in 2016. b. Tom deducts a $5,000 capital loss in 2016. c. Tom deducts a business bad debt of $3,000 in 2016 and carries $2,000 over to subsequentyears. d. Tom deducts a $3,000 capital loss in 2016 and carries $2,000 over to subsequent years. e. Tom must amend her 2015 tax return to deduct the loss.

An individual, business, or company lent money to others to receive the benefit of interest payments…

Answered: 15. In 2016, Tom loaned his friend…

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter7: Deductions And Losses: Certain Business Expenses And Losses

Section: Chapter Questions

Problem 14DQ

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Elsie had an AGI of $105,000 in 2018. All of her income was from wages. Elsie owned a rental house and actively participated in the management of the rental house. The rental house generated losses of $25,000 in 2018. Elsie has over $100,000 at risk. What amount of the $25,000 loss can Elsie deduct in 2018?
During 2016, Becky loans her brother Ken $5,000, which he intends to use to establish a small business. Because Ken has no other assets and needs cash to establish the business, the agreement provides that Ken will repay the debt if (and when) sufficient funds are generated from the business. Becky and Ken do not establish an interest rate. The business is unsuccessful, and Ken is forced to file for bankruptcy in 2017. By the end of 2017, it is estimated that the creditors will receive only 20% of the amount owed. In 2018 the bankruptcy proceedings are closed, and the creditors receive 10% of the amount due on the debt. Requirement What is Becky's bad debt deduction for 2017? For 2018? (Enter a "0" if no bad debt deduction can be taken.) Becky's bad debt deduction will be for 2017 and for 2018.
15. In 2016, Tom loaned his friend Janelle $5,000 to invest in various stocks. Janelle signed a note to repay the principal with interest. In 2017, the stock market plunged and Janelle incurred large losses. In late 2017, Janelle declared personal bankruptcy and Tom was unable to collect any of the loan. Tom had no other gains or losses in 2016 or 2017. His income from wages in both 2016 and 2017 was $50,000. The result is: a. Tom deducts a business bad debt of $5,000 in 2016. b. Tom deducts a $5,000 capital loss in 2016. c. Tom deducts a business bad debt of $3,000 in 2016 and carries $2,000 over to subsequent years. d. Tom deducts a $3,000 capital loss in 2016 and carries $2,000 over to subsequent years. e. Tom must amend her 2015 tax return to deduct the loss. 16. Agnes gives an asset valued at $12,000 with a basis of $10,000 to Mary; Agnes dies six-months later leaving an asset valued at $10,000 with a basis of $12,000 to Larry. What are Mary’s’ and Larry’s bases in these assets?…
(a) In 2010 Jim loaned Patti $4,500, as a personal loan. In 2014 (when the outstanding loan is still $4,500), Patti informs Jim that she will not be able to repay the loan. In 2014, Jim has $1,000 short-term capital gain and $40,000 wage income. In 2015, Patti repays the $4,500. How much, if any, of that does Jim have to include in his income for 2015? (b) Suppose, instead, that the loan in part (a) was a business loan. How much, if any, of the 2015 repayment does Jim need to include in his income?
Kate acquires a principal residence in 2017 for $200,000 secured by a $180,000 mortgage. In 2021, Kate catches the coronavirus and misses work for 3 months. Her employer stops paying her after 10 days. In 2021 when the mortgage balance is $170,000, Kate and the bank revise her terms and lower the loan balance to $150,000. The market value of the home remains above $200,000. How much cancellation of debt income will Kate recognize?
I'm 2015, mary invested 200,000 in a business that is not a passive activity. During 2016, her share of the business loss is 140,000. In 2017, her share of the business los 100,000. How much can mary deduct in 2016 and 2017?
Karyn loaned $32,000 to her co-worker to begin a new business several years ago. If her co worker declares bankruptcy on june 22 of the current year, how much of the bad debt loss will Karyn be able to deduct this year?
Jared Jones has started a screen printing business. Because he is a private company he has chosen not to use accrual based on accounting. In January of 2017 he decides to go to the bank and ask for a loan to finance the purchase of a large piece of machinery. He is able to show the bank a net income of $75,000 for the year ending December 31, 2016. Based on his income, and debt to asset ratio the bank is unable to give him the loan. Jared goes back to the office and instructs his accountant to re-do the financial statements. This time using accrual basis accounting. The accountant adds an additional $20,000 of revenue and net income for a job that was performed at the end of December, and expected to be paid in January. He also includes $20,000 on the balance sheet for accounts receivable, and $2,500 in accrued expenses. With this new information Jared is able to get his loan. Was it ethical for Jared to include the $20,000 in his net income? Why or why not?
ared Jones has started a screen printing business. Because he is a private company he has chosen not to use accrual based on accounting. In January of 2017 he decides to go to the bank and ask for a loan to finance the purchase of a large piece of machinery. He is able to show the bank a net income of $75,000 for the year ending December 31, 2016. Based on his income, and debt to asset ratio the bank is unable to give him the loan. Jared goes back to the office and instructs his accountant to re-do the financial statements. This time using accrual basis accounting. The accountant adds an additional $20,000 of revenue and net income for a job that was performed at the end of December, and expected to be paid in January. He also includes $20,000 on the balance sheet for accounts receivable, and $2,500 in accrued expenses. With this new information Jared is able to get his loan. Was it ethical for Jared to include the $20,000 in his net income? Why or why not?
In 2020, Matt and Rhonda had a capital gain of $6,000 from the sale of stock. They also sold a piece of land during the year; they had purchased the land in 2015 as an investment. Unfortunately, the value of the land decreased, and they incurred a $5,000 loss at the time of sale. They had no other capital gains or losses during the year, and they had no prior-year carryover losses. How much of the loss from the sale of the land may the couple use to offset their ordinary income? $0 $1,000 $3,000 $5,000
Noelle's diamond ring was stolen in 2017. She originally paid $15,400 for the ring, but it was worth considerably more at the time of the theft. Noelle filed an insurance claim for the stolen ring, but the claim was denied. Because the insurance claim was denied, Noelle took a casualty loss deduction for the stolen ring on her 2017 tax return. In 2017, Noelle had AGI of $77,000. After Noelle threatened legal action in early 2019, the insurance company had a "change of heart" and sent Noelle a check for $9,240 for the stolen ring. The per-event floor is $100. What is the proper tax treatment of the $9,240 Noelle received from the insurance company in 2019? Noelle should _______the amount of______.
Amanda purchased a home for $500,000 in 2016. She paid $100,000 cash and borrowed the remaining $400,000. This is Amanda's only residence. Assume that in year 2023, when the home had appreciated to $750,000 and the remaining mortgage was $300,000, interest rates declined and Amanda refinanced her home. She borrowed $500,000 at the time of the refinancing, paid off the first mortgage, and used the remainder for purposes unrelated to the home. What is her total amount of acquisition indebtedness for the purposes of determining the deduction for home mortgage interest? (Assume not married filing separately.)

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