2. The Jon and Terry Partnership acquired $600,000 in qualifying Sec. 1244 stock from Bee Corporation as an investment in Year 1. The partnership sold the Bee Corporation stock in Year 3 for $450,000. Jon and Terry have shared profits and losses in a 2:1 ratio, respectively, since its inception. What is the amount and the character of the loss recognized by Jon, who is single, in Year 3?

Ordinary Loss

Capital Loss

• A.

$50,000

$50,000

• B.

$0

$50,000

• C.

$100,000

$0

• D.

$0

$100,000

6. Which of the following is considered trade or business income for the purpose of determining the employees net operating loss?

• A.Salary from part-time employment.
• B.Gain on sale of investment property.
• C.Distribution from a H.R. 10 (Keogh) retirement plan set up by a self-employed person.
• D.Interest income from savings.

7. Ted had an NOL of $25,000. If the NOL was not a result of a casualty, theft, or presidentially declared disaster, how many years can Ted carry back the loss?

• A.4 years.
• B.1 year.
• C.0 years.
• D.2 years.

9. On January 1 of the current year, Mr. B lent $12,000 to his daughter to pay expenses for college. His daughter repaid $3,000 on July 1 of the same year, and Mr. B forgave the balance upon his daughters agreement to enter his business. How is the amount treated on Mr. Bs individual income tax return?

• A.Not deductible.
• B.Fully deductible as a business bad debt.
• C.Fully deductible as a short-term capital loss.
• D.Fully deductible as a long-term capital loss.

12. A flood damaged a machine used in Ralphs business. The machine had been purchased 2 years earlier at a cost of $14,000, and Ralph had claimed $4,000 in depreciation. The FMV of the machine was $18,000 before the flood and $3,000 after the flood. The machine was insured, and Ralph was reimbursed $12,000. What is Ralphs gain or loss from the casualty?

• A.$2,000 loss.
• B.$3,000 loss.
• C.$2,000 gain.
• D.$15,000 loss.

15. What is the amount of the net operating loss for 2019 based on the following information?

Total income:
Interest on nonbusiness savings	$ 425
Net long-term capital gain on
sale of business property	2,000
Salary	1,000
Total deductions:
Net loss from business (sales of
$86,000 less expenses of $92,000)	$6,000
Net nonbusiness short-term capital
loss on sale of stock	1,000
Standard deduction	12,200

• A.$0
• B.$3,000
• C.$15,775
• D.$2,575