Three part question, taxable income and loss. Taxation of Individuals class.

In the current year Alice reports $150,000 of salary income, $20,000 of income from activity X, and $35,000 and $15,000 losses from activities Y and Z, respectively. All three activities are passive with respect to Alice and are purchased during the current year. Solution Required: a. What is the amount of loss that may be deducted with respect to each of these activities? b. Compute the amount of loss that must be carried over for each activity. Jerry sprayed all of the landscaping around his home with a pesticide in June of the current year. Shortly thereafter, all of the trees and shrubs unaccountably died. The FMV and the adjusted basis of the plants were $15,000. Later in the year, the pesticide manufacturer announced a recall of the particular batch of pesticide that Jerry used. It also announced a program whereby consumers would be repaid any damage caused by the improper mixture. Jerry is single and reports $38,000 AGI in the current year and $42,000 in the subsequent year. Required: a. Assume that in the current year Jerry files a claim for his losses and receives notification that payment of $15,000 will be received in the subsequent year; however, Jerry receives full payment for the damage in the current year. How should the loss and the reimbursement be reported? b. How will your answer to Part a change if in the subsequent year the manufacturer files bankruptcy and Jerry receives $1,500 in total and final payment for his claim? c. How will your answer to Part a change if the announcement and the reimbursement do not occur until late in the subsequent year, after Jerry has already filed his tax return for the previous tax year? Solution Michelle and Mark are married and file a joint return. Michelle owns and unincorporated dental practice. Mark works part-time as a high school math teacher, and spends the remainder of his time caring for their daughter. During the current year, they report the following items: Item Mark's salary Interest earned on savings account Interest paid on personal residence Itemized deductions for state and local taxes related to Michelle's dental practice Items Revenues Payroll and salary expense Supplies Rent Advertising Depreciation Amount $18,000 1,200 7,100 3,400 65,000 49,000 17,000 16,400 4,600 8,100 Required: a. What is Michelle and Mark's taxable income or loss for the year? b. What is Michelle and Mark's NOL for the year? Solution