Question 1. Why do you think that mortgage interest and real estate taxes for a personal residence are tax deductible, but rent payments are not? Are rental payments for a business tax deductible?

Question 2. When an individual pays for business expenses, he or she needs to be careful not to mix the personal with the business. What are some expenses or areas that should be of a concern, where individuals need to be careful not to mix them?

Quiz

(TCO 2) Janice is single, has gross income of $38,000, and incurred the following expenses:

(TCO 2) During the year, Rick had the following insured personal casualty losses (arising from one casualty). Rick also had $18,000 AGI for the year.

(TCO 3) During the current year, Chuck's home was burglarized. Chuck had the following items stolen:

(TCO 10) Benita incurred a business expense on December 10, 2011, which she charged on her bank credit card. She paid the credit card statement, which included the charge on January 5, 2012. Which of the following is correct?

(TCO 10) Paula pursued a hobby of making bedspreads in her spare time. During the year, she sold the bedspreads for $6,000. She incurred expenses as follows:

(TCO 10) Jim loaned his friend Sam $8,000 several years ago. During the current year, Sam declared bankruptcy and Jim was paid $1,000. For the current year, Jim has a salary of $80,000 and a long-term capital gain of $15,000. What amount of net loss may Jim deduct for the current year?

(TCO 10) Two years ago, Sharon loaned her sister $10,000 to buy a car. No note was issued for the loan, no provision for interest was made, and no repayment date was specified. During the current year, Sharon's sister died leaving no estate. Sharon's bad debt deduction for the current year is:

(TCO 10) Tan Company acquires a new machine (10-year property) on January 15, 2011 at a cost of $200,000. Tan also acquires another new machine (seven-year property) on November 5, 2010 at a cost of $40,000. No election is made to use the straight-line method. The company does NOT make the § 179 election. Determine the total deductions in calculating taxable income related to the machines for 2011.

TCO 10) Carlos purchased an apartment building on November 16, 1993 for $1 million. Determine the cost recovery for 2011.

(TCO 2) Jane's automobile, which was used only for business purposes, was destroyed by fire. Jane had unintentionally allowed her insurance coverage to expire. The fair value of the automobile was $9,000 at the time of the fire, and its adjusted basis was $10,000. Jane is allowed a loss deduction of:

ACCT 324 Week 3 Course Project, Deductions, Losses and Depreciation