income taxation
COMPREHENSIVE VOLUME--CHAPTER 7--DEDUCTIONS AND LOSSES: CERTAIN BUSINESS EXPENSES AND LOSSES
Student: ___________________________________________________________________________
1. James is in the business of debt collection. He purchased a $20,000 account receivable from Green Corporation for $15,000. During the year, James collected $17,000 in final settlement of the account. James can take a $2,000 bad debt deduction in the current year.
True False 2. If a business debt previously deducted as partially worthless becomes totally worthless this year, only the amount not previously deducted can be deducted this year.
True False 3. Last year, taxpayer had a $10,000 nonbusiness bad debt. Taxpayer also had an $8,000 short-term capital gain and taxable income of $35,000. If taxpayer collects the entire $10,000 during the current year, $8,000 needs to be included in gross income.
True False 4. A cash basis taxpayer must include as income the proceeds from the sale of an account receivable to a collection agency.
True False 5. If an account receivable written off during a prior year is subsequently collected during the current year, the amount collected must be included in the gross income of the current year to the extent it created a tax benefit in the prior year.
True False 6. A nonbusiness bad debt deduction can be taken any year after the debt becomes totally worthless.
True False 7. A business bad debt is a debt unrelated to the taxpayer’s trade or business either when it was created or when it became worthless.
True False 8. In determining whether a debt is a business or nonbusiness bad debt, the debtor’s use of the borrowed funds is important.
True False 9. A corporation which makes a loan to a shareholder can have a nonbusiness bad debt deduction.
True False 10. A nonbusiness bad debt can offset an unlimited amount of long-term capital gain.
True False 11. The
Student: ___________________________________________________________________________
1. James is in the business of debt collection. He purchased a $20,000 account receivable from Green Corporation for $15,000. During the year, James collected $17,000 in final settlement of the account. James can take a $2,000 bad debt deduction in the current year.
True False 2. If a business debt previously deducted as partially worthless becomes totally worthless this year, only the amount not previously deducted can be deducted this year.
True False 3. Last year, taxpayer had a $10,000 nonbusiness bad debt. Taxpayer also had an $8,000 short-term capital gain and taxable income of $35,000. If taxpayer collects the entire $10,000 during the current year, $8,000 needs to be included in gross income.
True False 4. A cash basis taxpayer must include as income the proceeds from the sale of an account receivable to a collection agency.
True False 5. If an account receivable written off during a prior year is subsequently collected during the current year, the amount collected must be included in the gross income of the current year to the extent it created a tax benefit in the prior year.
True False 6. A nonbusiness bad debt deduction can be taken any year after the debt becomes totally worthless.
True False 7. A business bad debt is a debt unrelated to the taxpayer’s trade or business either when it was created or when it became worthless.
True False 8. In determining whether a debt is a business or nonbusiness bad debt, the debtor’s use of the borrowed funds is important.
True False 9. A corporation which makes a loan to a shareholder can have a nonbusiness bad debt deduction.
True False 10. A nonbusiness bad debt can offset an unlimited amount of long-term capital gain.
True False 11. The