Reference no: EM133135882

Questions -

Q1. Norn's car, which he uses 100% for personal purposes, was completely destroyed in an accident in 2020. The car's adjusted basis at the time of the accident was $13,000. Its fair market value was $10,000. The car was covered by a $2,000 deductible insurance policy. Norm did not file a claim against the insurance policy because of a fear that reporting the accident would result in a substantial increase in his insurance rates. His adjusted gross income was $14,000 (before considering the loss). What is Norn's deductible loss?

Q2. Sean and Jenny own a home in Boulder City, Nevada, near Lake Mead. During the year, they rented the house for 40 days for $3,000 and used it for personal use for 18 days. The house remained vacant for the remainder of the year. The expenses for the house included $14,000 in mortgage interest, $3,500 in property taxes, $1,100 in utilities, $1,300 in maintenance, and $10,900 in depreciation. What is the deductible net loss for the rental of their home?

Q3. Iris, a calendar year cash basis taxpayer, owns and operates several TV rental outlets in Florida, and wants to expand to other states. During 2012, she spends $14,000 to investigate TV rental stores in South Carolina and $9,000 to investigate TV rental stores in Georgia. She acquires the South Carolina operations, but not the outlets in Georgia. As to these expenses, Iris should be able to deduct.

Q4. Jack received a court award in a civil libel and slander suit against National Gossip. He received $120,000 for damages to his professional reputation, $100,000 for damages to his personal reputation, and $60,000 in punitive damages. Jack must include in his gross income as a damage award:

Q5. Jimmy is employed as an accountant for a large firm in Denver. For relaxation, she likes to go to a nearby casino and play in blackjack tournaments. During 2020, she incurred $6,000 in gambling losses and $5,510 in gambling winnings.

Jimmy plans to itemize her deductions in 2020 because she purchased a home this year and has mortgage interest expenses.

What amount could she claim on her return for other itemized deductions for the year?

Q6. Robert purchased and placed in service $100,000 of 7-year class assets on August 10 of the current year. He also purchased and placed in service $500,000 of 5-year class assets on November 15 of the current year. He does not claim any available additional first-year depreciation. If Robert elects to use the MACRS straight-line method of cost recovery on the 7-year class

Q7. Lopez acquired a building on June 1, 2016, for $1,000,000. Calculate Lopez's cost recovery deduction for 2021 if the building is:

a. Classified as residential rental real estate.

b. Classified as nonresidential real estate.

Q8. Diana acquired, for $65,000, and places in service a 5-year class asset on December 19, 2021. It is the only asset that Diana acquires during 2021.

Diana does not elect immediate expensing under § 179. She elects additional first-year depreciation. Calculate Diana's total cost recovery deduction for 2021.

Q9. On March 25, Parscale Company purchases the rights to a mineral interest for $8,000,000. At that time, the remaining recoverable units in the mineral interest are estimated to be 500,000 tons. If 80,000 tons are mined and 75,000 tons are sold this year, calculate Parscale's cost depletion for the year.

Q10. On March 15, 2021, Helen purchased and placed in service a new Escalade. The purchase price was $62,000, and the vehicle had a rating of 6,500 GVW. The vehicle was used 100% for business.

a. Assuming that Helen does not use additional first-year depreciation, calculate the total depreciation deduction that she can take on the vehicle for 2021.

b. What would your answer be if Helen decided to take additional first-year depreciation?