Income Tax Fundamentals 2020
38th Edition
ISBN: 9780357391129
Author: WHITTENBURG
Publisher: Cengage
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Chapter 3, Problem 18P
a
To determine
Introduction: When goods are sold on credit and
The amount of deduction on bad debts allowed for this year to S.
b
To determine
Introduction: When goods are sold on credit and account receivable becomes uncollectible, the deduction of these bad debts is allowed to the extent that income from that sale. The specific charge off method is used and deductions are allowed only after the determination of debt as worthless.
The treatment of deduction not used this year.
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Students have asked these similar questions
1. Tim loaned a friend $4,000 to buy a used car. In the current year, Tim's friend declares bankruptcy and the debt is considered totally worthless. What amount may Tim deduct on his individual income tax return for the current year as a result of the worthless debt, assuming he has no other capital gains or losses for the year?
a.$3,000 short-term capital loss
b.$4,000 short-term capital loss
c.$3,000 ordinary loss
d.$4,000 ordinary loss
e.$2,000 short-term capital loss
2. An asset's adjusted basis is computed as:
a.Original basis − capital improvements + accumulated depreciation.
b.Original basis + capital improvements − accumulated depreciation.
c.Original basis + capital improvements + gain or loss realized.
d.Original basis + capital improvements + accumulated depreciation.
e.None of these choices are correct.
3. Sol purchased land as an investment on January 12, 2018 for $85,000. On January 31, 2021 Sol sold the land for $90,000 cash. What is the nature of the gain or loss?…
1.Three years ago, Morris loaned Alma $5,000 (Year 1) with the understanding that the loan would be repaid in two years. Last year (Year 3) Alma filed for bankruptcy, and Morris learned that he would receive $0.10 on the dollar. In the current year, Year 4, the final settlement was made, and Morris received $300. Assuming the loan is a nonbusiness bad debt, how should Morris account for the loan?
a. $4,700 ordinary loss in the current year.
b. $3,000 ordinary loss last year and $1,700 ordinary loss in the current year
c. $4,700 short-term capital loss in the current year.
d. $3,000 short-term capital loss last year and $1,700 short-term capital loss in the current year.
Carrie loaned her friend $4500 to buy a used car. She had her friend sign a note with repayment terms and set a reasonable interest rate on the note because the $4500 was most of her savings. Her friend left town with out a forwarding address, and nobody Carrie knows has heard from her in the last year. How should Carrie treat the bad loan for tax purpose? This is a ___________ bad debt. Assuming this is carries only capital gain or loss, she may claim $____________in the current year and __________any remaining amount.
Chapter 3 Solutions
Income Tax Fundamentals 2020
Ch. 3 - Prob. 1MCQCh. 3 - Prob. 2MCQCh. 3 - Prob. 3MCQCh. 3 - Which of the following formulas represents the...Ch. 3 - Prob. 5MCQCh. 3 - Prob. 6MCQCh. 3 - Heather drives her minivan 953 miles for business...Ch. 3 - Prob. 8MCQCh. 3 - Prob. 9MCQCh. 3 - Under the high-low method, the federal per diem...
Ch. 3 - Prob. 11MCQCh. 3 - Prob. 12MCQCh. 3 - Prob. 13MCQCh. 3 - Prob. 14MCQCh. 3 - Prob. 15MCQCh. 3 - Prob. 16MCQCh. 3 - Prob. 17MCQCh. 3 - Prob. 18MCQCh. 3 - Prob. 19MCQCh. 3 - Prob. 20MCQCh. 3 - Prob. 21MCQCh. 3 - Prob. 22MCQCh. 3 - Prob. 23MCQCh. 3 - Stewie, a single taxpayer, operates an activity as...Ch. 3 - Prob. 2PCh. 3 - Lawrence owns a small candy store that sells one...Ch. 3 - Business with gross receipts of $25 million or...Ch. 3 - Teresa is a civil engineer who uses her automobile...Ch. 3 - Prob. 7PCh. 3 - Martha is a self-employed tax accountant who...Ch. 3 - Prob. 9PCh. 3 - Go to the U.S. General Services Administration...Ch. 3 - Prob. 11PCh. 3 - Prob. 12PCh. 3 - Marty is a sales consultant. Marty incurs the...Ch. 3 - Prob. 14PCh. 3 - Prob. 15PCh. 3 - Cooper and Brandy are married and file a joint...Ch. 3 - Prob. 17PCh. 3 - Prob. 18PCh. 3 - Prob. 19PCh. 3 - Prob. 20PCh. 3 - Cindy operates a computerized engineering drawing...Ch. 3 - Prob. 22PCh. 3 - Prob. 23PCh. 3 - Prob. 24PCh. 3 - Lew is a practicing CPA who decides to raise...
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- Monty loaned his friend Ned 20,000 three years ago. Ned signed a note and made payments on the loan. Last year, when the remaining balance was 11,000, Ned filed for bankruptcy and notified Monty that he would be unable to pay the balance on the loan. Monty treated the 11,000 as a nonbusiness bad debt last year, before considering the tax implications of the nonbusiness bad debt, Monty had capital gains of 9,000 and taxable income of 45,000. During the current year, Ned paid Monty 10,000 in satisfaction of the debt. Determine Montys tax treatment for the 10,000 received in the current year.arrow_forwardOn June 30, 2019, Kelly sold property for 240,000 cash and a 960,000 note due on September 30, 2020. The note will also pay 6% interest, which is slightly higher than the Federal rate. Kellys cost of the property was 400,000. She is concerned that Congress may increase the tax rate that will apply when the note is collected. Kellys after-tax rate of return on investments is 6%. a. What can Kelly do to avoid the expected higher tax rate? b. Assuming that Kellys marginal combined Federal and state tax rate is 25% in 2019, how much would the tax rates need to increase to make the option identified in part (a) advisable?arrow_forwardLast year, lana purchased a $100,000 account receivable for $90,000. During the current year, Lucy collected $97,000 on the account. What are the tax consequences to Lucy associated with the collection of the account receivable? No subsequent collections are expected. a.$7,000 gain b.$3,000 loss c.$13,000 loss d.$2,000 gainarrow_forward
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