^Kori^: 7. Kevin and Erica own a house at the beach. The house was rented to unrelated parties for eight weeks during the year. Erica and the children used the house 12 days for their vacation during the year. After properly dividing the expenses between rental and personal use, it was determined that a loss was incurred as follows:

Gross rental income $4,000 Less: Mortgage interest and property taxes $3,500 Other allocated expenses 2,000 (5,500) Net rental loss ($1,500) What is the correct treatment of the rental income and expenses on their joint income tax return for the current year assuming the IRS approach is used if applicable?

A. A $1,500 loss should be reported. B. Only the mortgage interest and property taxes should be deducted. C. Since the house was used more than 10 days personally by Kevin and Erica, the rental expenses (other than mortgage interest and property taxes) are limited to the gross rental income in excess of deductions for interest and taxes allocated to the rental use. D. Kevin and Erica should include none of the rental income or expenses related to the beach house in their current year income tax return.

^Kori^: 8. Steve and Holly report the following items for 2020:

Dividend income $16,000 Interest income 14,000 Itemized deductions (none of the amount resulted from a casualty loss) (26,000) Business capital gains 4,000 Business capital losses (10,000) In calculating their net operating loss, and with respect to the above amounts only, what amount must be added back to taxable income (loss)?

^Kori^: 9.Nancy had a painting worth $10,000 (basis $6,000) stolen from her lake house in 2017. Her insurance company told her that her policy did not cover the theft. Nancys other itemized deductions were $2,000, and she had AGI of $30,000 in 2017. In March 2020, Nancys insurance company decided that Nancys policy did cover the theft and they paid Nancy $5,000. Determine the tax treatment of the $5,000 received by Nancy during 2020. A. None of the $5,000 should be included in gross income. B. $2,900 should be included in gross income. C. $5,000 should be included in gross income. D. Last years return should be amended to include the $5,000.

^Kori^: 10.Michelle was involved in an automobile accident in 2020. Her car was used 40% for business and 60% for personal use. The car had originally cost $40,000. At the time of the accident, the car was worth $20,000 and Michelle had taken $8,000 of depreciation. The car was totally destroyed and Michelle had let her car insurance expire. If her AGI is $50,000 (before considering the loss), determine her AGI.