CONCEPTS IN FED.TAX.,2020-W/ACCESS
20th Edition
ISBN: 9780357110362
Author: Murphy
Publisher: CENGAGE L
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Textbook Question
Chapter 7, Problem 45P
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 Goodson’s 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 company’s 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. Goodson’s 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.
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