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ACCT 324 Week 3 Quiz

Question 1.1 (TCO 2) Saul is single, under age 65, and has gross income of $50,000. His bona fide deductible expenses are as follows: 

Question 2.2. (TCO 2) On September 3, 20×1, Able purchased stock in Red Corporation (The stock is not small business stock.) for $6,000. On December 31, 20×1, the stock was worth $8,500. On August 15, 20×2, Able was notified that the stock was worthless. How should Able report this item on his 20×1 and 20×2 tax returns? (Points : 2)

Question 3.3. (TCO 3) Last year, Billy had silverware worth $25,000 (basis of $20,000) stolen from his home. Billy’s insurance company told him that his policy did not cover the theft. Therefore, Billy took a casualty loss on his return last year. His AGI for last year was $40,000. His other itemized deductions last year were $13,000. In July of the current year, Billy’s insurance company decided that Billy’s policy did cover the theft of the silverware, and it paid Billy $25,000. Determine the tax treatment of the $25,000 received by Billy during the current year. (Points : 2)

Question 4.4. (TCO 10) Mary purchased a new 5-year class asset on March 7, 20×2. The asset was listed property (not an automobile). It was used 60% for business and the rest of the time for personal use. The asset cost was $120,000. Mary made the § 179 election. The income from the business before the § 179 deduction was $200,000. Determine the total deductions with respect to the asset for 20×2. (Points : 2)

Question 5.5. (TCO 10) Paula pursued a hobby of making bedspreads in her spare time. During the year, she sold the bedspreads for $6,000. She incurred expenses as follows: Question

6.6. (TCO 10) Mabel is in the business of factoring accounts receivable. Last year, she purchased a $20,000 account receivable for $15,000. This year, the account was settled for $18,000. How much loss can Mable deduct and in which year? (Points : 2)

Question 7.7. (TCO 10) Regarding research and experimental expenditures, which of the following are qualified expenditures? (Points : 2)

Question 8.8. (TCO 10) On June 1 of the current year, Tab converted a machine to rental property. At the time of the conversion, the machine was worth $90,000. Five years ago, Tab purchased the machine for $120,000. The machine is still encumbered by a $50,000 mortgage. What is the basis of the machine for cost recovery? (Points : 2)

Question 9.9. (TCO 10) Carlos purchased an apartment building on November 16, 1994 for $1 million. Determine the cost recovery for 20×2. (Points : 2)Question

10.10. (TCO 2) Ken’s uninsured automobile, which was used only for business purposes, was damaged in an accident. At the date of the accident, the fair market value of the automobile was $12,000 and its adjusted basis was $9,000. After the accident, the automobile was appraised at $4,000. Ken’s loss deduction is (Points : 2)