Chapter 06: Deductions and Losses:

You may use any format for the answer, however, the Conclusion, Rule, Application, Conclusion format is preferable for clarity and better understanding.

-The stock of Eagle, Inc. is owned as follows:

Tom 23%Toms uncle 22%Toms daughter 7%Toms sister 15%Toms spouse 15%Toms nephew 8%Toms CPA, unrelated 10%Tom sells land and a building to Eagle, Inc. for $212,000. His adjusted basis for these assets is $225,000. Calculate Toms realized and recognized loss associated with the sale.

-Tracy invested in the following stocks and bonds during 2018.

Blue, Inc. $25,000 City of Falcon bonds 75,000

To finance the investments, she borrowed $100,000 from Swan Bank. Interest expense paid on the loan during 2018 was $5,000. During 2018, Tracy received $1,250 of dividend income from Blue, Inc. and $3,000 of interest income on the municipal bonds. Determine the amount of Tracys gross income. Determine the maximum amount of Tracys deductible interest expense.

-Are all personal expenses disallowed as deductions in 2018?