^Kori^: 11. Two years ago, Gina loaned Tom $35,000. Tom signed a note the terms of which called for monthly payments of $2,000 plus 6% interest on the outstanding balance. Last year, when the balance owing on the loan was $13,000, Tom defaulted on the note. As of the end of last year, there appeared to be no reasonable prospect of Gina recovering the $13,000. As a consequence, Gina claimed the $13,000 as a nonbusiness bad debt. Last year, Gina had AGI of $50,000, which included $16,000 of net long-term capital gains. Gina did not itemize her deductions. During the current year, Tom paid Gina $11,000 in final settlement of the loan. How much income should Gina report in her current year tax return?

^Kori^: 12.For an activity classified as a hobby, the expenses are categorized as follows: (1) Amounts that affect adjusted basis and would be deductible under other Code sections if the activity had been engaged in for profit (e.g., depreciation, amortization, and depletion). (2) Amounts deductible under other Code sections without regard to the nature of the activity, such as property taxes and home mortgage interest. (3) Amounts deductible under other Code sections if the activity had been engaged in for profit, but only if those amounts do not affect adjusted basis (e.g., maintenance, utilities, and supplies). For tax years before 2018, if these expenses exceed the gross income from the activity and are thus limited, the sequence in which they are deductible is:

A. (1), (2), (3). B. (1), (3), (2). C. (2), (3), (1). D. (3), (2), (1).

^Kori^: 13. Sonia and Brad divorced. Sonias attorney fee of $4,500 is allocated as follows:

General representation in obtaining the divorce $1,400 Services in obtaining custody of the child 800 Services in settlement of marital property 500 Determining the tax consequences of: Dependency deduction for child 600 Tax consequences of property settlement 1,200 How much can she deduct on her tax return?

^Kori^: 14.Albert had a terminal illness that would require almost constant nursing care for the remaining two years of his estimated life, according to his doctor. Albert had a life insurance policy with a face amount of $100,000. He had paid $25,000 of premiums on the policy. The insurance company has offered to pay him $80,000 to cancel the policy, although its cash surrender value was only $55,000. He accepted the $80,000. Albert used $15,000 to pay his medical expenses. Albert made a miraculous recovery and lived another 20 years. As a result of cashing in the policy: A. Albert must recognize $55,000 of gross income, but he has $15,000 of deductible medical expenses. B. Albert must recognize $65,000 ($80,000 $15,000) of gross income. C. Albert must recognize $40,000 ($80,000 $25,000 $15,000) of gross income. D. Albert is not required to recognize any gross income because of his terminal illness.

^Kori^: 15. On July 20, 2019, Michael (MFJ) purchased 3,000 shares of Pink Corporation stock (the stock is 1244 small business stock) for $8/share. On November 10, 2019, Michael purchased an additional 1,000 shares of Pink Corporation stock from a friend for $15/share. On September 15, 2020, Matt sold the 4,000 shares of stock for $27.5/share. How much short term capital loss should Matt include in his 2020 return from the sale of the stock?