Acct 323 Week 4 Homework Solution

ACCT 323 Week 4 Homework Solution

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1) In the current tax year, Gunther earned $125,000 from his job as a civil engineer. In addition,

he received $30,000 of income from Activity A, and lost $40,000, and 20,000 from Activities B

and C respectively. Activities A, B, and C are passive activities that Gunther acquired in the

current year. What amount of loss may Gunther deduct on his current year taxes with respect to

each activity? What amount of loss, if any, must be carried over to the subsequent year for each

activity?

2) During the current year, Beth and Bill, who file a joint return, incurred the following items of

income and loss:

Salary

$ 130,000

Activity A (passive)

10,000

Activity B (rental real estate/nontrade or business)

(30,000)

Activity C (rental real estate/nontrade or business)

(20,000)

Beth and Bill actively participate in activities B and C, and they own 100% of each rental

property.

a)

What is their AGI for the year?

b)

What is the amount of suspended losses, if any, that may be carried over with

respect to each activity?

3) In the current tax year, Neil’s personal automobile was totaled in a traffic accident. Neil had

purchased the automobile two years earlier for $28,000. The FMV of the automobile just prior

to the accident was $18,000. The automobile is now worthless. Neil received a $14,000

insurance check in settlement of his accident claim. Later that same year, a thief broke into

Neil’s home and took several antiques purchased several years ago for $8,000. Their current

FMV at the date of the theft was $12,000. The antiques were not insured. Neil’s AGI for the

current year is $60,000. What is the amount of Neil’s deductible casualty loss in the current

year?

4) In 2013, Sarah loans Seymour $5,000 for his use in establishing his business. As Seymour

has no other assets and needs cash to establish the business, the loan agreement provides that...