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Exam 6: Losses and Loss Limitations

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Question 101

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While Susan was on vacation during the current year, someone broke into her home and stole the following items: ∙ A computer used 60% in connection with Susan's employment as an employee and 40% for her personal use.The cost of the computer was $8,000.Depreciation of $3,000 had been taken on the computer and it had a fair market value of $4,000 at the time of the theft. ∙ A painting, which Susan purchased as an investment for $10,000, had a fair market value of $17,000. ∙ Silverware purchased for $3,000 had a fair market value of $5,000. ∙ Cash of $30,000. Susan's adjusted gross income, before considering any of the above items, is $60,000.Determine the total amount of Susan's itemized deductions resulting from the theft.

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Question 102

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Identify how the passive activity loss rules broadly classify various types of income and losses.Provide examples of each category.

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The passive activity loss rules require ...

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Question 103

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In 2017, Amos had AGI of $50,000.Amos also had a diamond ring stolen which cost $20,000 and was worth $17,000 at the time of the theft.He itemized deductions on last year's tax return.In 2018, Amos recovered $17,000 from the insurance company.Therefore, he must include $11,900 in gross income on the tax return for the current year.

Lindsey, an attorney, earns $125,000 from her law practice in the current year.In addition, she receives $50,000 in dividends and interest during the year.Further, she incurs a loss of $40,000 from an investment in a passive activity.What is Lindsey's AGI for the year after considering the passive investment?

In 2017, Kelly earns a salary of $200,000 and invests $40,000 for a 20% interest in a partnership not subject to the passive activity loss rules.Through the use of $800,000 of nonrecourse financing, the partnership acquires assets worth $1 million.The activity produces a loss of $150,000, of which Kelly's share is $30,000.In 2018, Kelly's share of the loss from the partnership is $15,000.How much of the loss from the partnership can Kelly deduct?