Question
1. In 2020, Wally had the following insured personal casualty losses (arising from one casualty in a Federally declared disaster area). Wally also had $42,000
1. In 2020, Wally had the following insured personal casualty losses (arising from one casualty in a Federally declared disaster area). Wally also had $42,000 AGI for the year before considering the casualty.
Fair Market Value | ||||
Asset | Adjusted Basis | Before | After | Insurance Recovery |
A | $9,200 | $8,000 | $1,000 | $2,000 |
B | 3,000 | 4,000 | -0- | 4,000 |
C | 3,700 | 1,700 | -0- | 900 |
Wally's casualty loss deduction is:
a.$500.
b.$4,700.
c.$4,800.
d.$1,600.
2. Jim had a car accident in 2020 in which his car was completely destroyed. At the time of the accident, the car had a fair market value of $30,000 and an adjusted basis of $40,000. Jim used the car 100% of the time for business use. He received an insurance recovery of 70% of the value of the car at the time of the accident. If Jim's AGI for the year is $60,000, determine his deductible loss on the car.
a.$19,000
b.$900
c.$2,900
d.$3,000
3. Mark and Lucy owned two stocks, Tinker, Inc. and Chance, Inc., that became worthless during year 8. The adjusted basis in Tinker was $80,000. Tinker was incorporated in year 2, and Mark and Lucy purchased their stock in year 4. Their adjusted basis in Chance was $20,000. Chance was incorporated in year 2, and Mark and Lucy were original stockholders. Both stocks were purchased for cash, and each corporation had total capital of $500,000. How much ordinary loss can Mark and Lucy deduct on their joint year 8 tax return as a result of these transactions?
a.$0
b.$20,000
c.$80,000
d.$100,000
4. Chad owned an office building that was destroyed in a tornado. The area was declared a Federal disaster area. The adjusted basis of the building at the time was $890,000. After the deductible, Chad received an insurance check for $850,000. He used the $850,000 to purchase a new building that same year. How much is Chad’s recognized loss, and what is his basis in the new building?
Recognized Loss New Basis
a. $0 $850,000
b. $0 $890,000
c. $40,000 $850,000
d. $40,000 $890,000
5. Hunter has a loss of $50,000 from his landscaping business in the current year. He reports the loss on Schedule C of his Form 1040. After deducting the loss against his other sources of income, he has a remaining business loss of $10,000. What are Hunter’s options regarding the remaining $10,000 business loss?
a. He can carry the loss back 4 years and forward 20 years.
b. He can carry the loss back 2 years and forward 20 years.
c. He can choose to only carry the loss forward 20 years.
d. He can carry the loss forward indefinitely.
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