chapter 8

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37. in a rage because of personal difficulties, evan drove recklessly and crashed his automobile, doing $8,000 worth of damage. fortunately, no one was injured. since evan received two speeding tickets during the past year, he is concerned about losing his insurance if he files an insurance claim. what tax issues should evan consider?
40. on september 30 of the current year, silver fox corporation files for bankruptcy. at the time, it estimates that the total fmv of its assets is $725,000 whereas the total amount of its outstanding debt amounts to $950,000. silver fox corporation has been engaged in the resale of tax preparation and tax research-related books and software for several years.
a. at the time of the bankruptcy, silver fox is owned by randall, who purchased the stock from an investor for $250,00 several years ago. randall is single. what are the amount and character of the loss sustained by randall upon silver fox's bankruptcy?
b. how would your answer to part a change if randall originally organized silver fox corporation, capitalizing it with $250,000 of cash and assuming silver fox qualifies as a small business corporation?
c. how would your answer to part a change if randall were a corporation instead of an individual?
d. how would your answer to part b change if randall were a corporation instead of an individual?
44. during the current year, irene, a married individual who files a joint return, reports the following items of income and loss:
salary $130,000
activity x (passive) 10,000
activity y (rental real estate, nontrade or business) (30,000)
activity z (rental real estate, nontrade or business) (20,000)
irene actively participates in activities y and z and owns 100% of both y and z.
a. what is irene's agi for the year?
b. what is the amount of suspended losses (if any) that may be carried over with respect to each activity?
48. tony is a carpenter who owes his own furniture manufacturing business. during 2009, vandals broke into the workshop, damaged several pieces of equipment, stole his delivery truck, and also stole his personal automobile, which he often kept in the workshop garage. the asset descriptions and related values are as follows:
equipment a:
fmv before casualty 12,300
fmv after casualty 4,000
cost to repair/replace 8,700
adjusted basis 9,000
insurance proceeds 3,700
equipment b:
fmv before casualty 8,100
fmv after casualty 0
cost to repair/replace 9,000
adjusted basis 3,000
insurance proceeds 3,700
equipment c:
fmv before casualty not available
fmv after casualty not available
cost to repair/replace 13,800
adjusted basis 15,300
insurance proceeds 11,400
delivery truck:
fmv before casualty 18,000
fmv after casualty 0
cost to repair/replace 32,000
adjusted basis 17,500
insurance proceeds 16,000
automobile:
fmv before casualty 15,000
fmv after casualty 0
cost to repair/replace 12,000
adjusted basis 28,000
insurance proceeds 12,000
although he could not obtain its fair market value after the casualties, troy's agi is $80,000. what deductions may tony take relating to the vandalism?
53. elaine is a physician who uses the cash method of accounting for tax purposes. during the current year, elaine bills ralph $1,200 for office visits and outpatient surgery. unfortunately, unknown to elaine, ralph moves away leaving no payment and no forwarding address. what is the amount of elaine's bad debt deduction with respect to ralph's dept?
54. during 2008, becky loans her brother ken $5,000, which he intends to use to establish a small business. because ken has no other assets and needs cash to expand the business, the agreement provides that ken will repay the debt if (and when) sufficient funds are generated from the business. no interest rate is agreed upon. the business is unsuccessful, and ken is forced to file for bankruptcy in 2009. by the end of 2010 the bankruptcy proceedings are closed, and the creditors receive 10% of the amount due on the debt. what is becky's bad debt deduction for 2009? for 2010?
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