Question 1. When a nonbusiness casualty loss is spread between tw

1. When a nonbusiness casualty loss is spread between two taxable years, the loss in the second year is reduced by 10% of adjusted gross income for the first year.

a. True

b. False

2. A theft loss of investment property is an itemized deduction not subject to the 2%-of-AGI floor.

a. True

b. False

3. Research and experimental expenditures do notinclude the cost of consumer surveys.

a. True

b. False

4. The cost of depreciable property is nota research and experimental expenditure.

a. True

b. False

5. If an election is made to defer deduction of research expenditures, the amortization period is based on the expected life of the research project if less than 60 months.

a. True

b. False

6. For tax years beginning in 2014, the domestic production activities deduction (DPAD) for a sole proprietor is calculated by multiplying 9% times adjusted gross income.

a. True

b. False

7. If qualified production activities income (QPAI) cannot be used in the calculation of the domestic production activities deduction in 2014 because of the taxable income limitation, the product of the amount not allowed multiplied by 9% can be carried over for 5 years.

a. True

b. False

8. The limit for the domestic production activities deduction (DPAD) uses all W-2 wages paid to employees by the taxpayer during the tax year.

a. True

b. False

9. A taxpayer can carry any NOL incurred forward up to 20 years.

a. True

b. False

10.A farming NOL may be carried back 2 years.

a. True

b. False

11.The amount of a farming loss cannot exceed the amount of the taxpayer’s NOL for the taxable year.

a. True

b. False

12.Peggy is in the business of factoring accounts receivable. Last year, she purchased a $30,000 account receivable for $25,000. This year, the account was settled for $25,000. How much loss can Peggy deduct and in which year?

a. $5,000 for the current year.

b. $5,000 for the prior year and $5,000 for the current year.

c. $5,000 for the prior year.

d. $10,000 for the current year.

e. None of the above.

13.Jed is an electrician. Jed and his wife are accrual basis taxpayers and file a joint return. Jed wired a new house for Alison and billed her $15,000. Alison paid Jed $10,000 and refused to pay the remainder of the bill, claiming the fee to be exorbitant. Jed took Alison to Small Claims Court for the unpaid amount and was awarded a $2,000 judgment. Jed was able to collect the judgment but not the remainder of the bill from Alison. What amount of loss may Jed deduct in the current year?

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