Chapter 7 In Class

Question 1

Two types of bad debts

Answer 1

Business bad debt and non-business bad debt

Question 2

Is it better to have a business bad debt or non -business

Answer 2

Business bad debt because the non-business is limited to 3,000

Question 3

With a non-business bad debt you have to wait unti?

Answer 3

The guy almost goes bankrupt and then you get to deduct the worthless things.

Question 4

Example of business debt

Answer 4

Where you loan a company money so it can keep manufacturing its products

Question 5

Loan vs gift

Answer 5

gift there’s no repayment expected. A gift is transferred out of love, respect, admiration.

Question 6

When you get money from loan is it income?

Answer 6

No

Question 7

When you have a receivable and then you have some bad debt can you right the bad debt off?

Answer 7

Yes

Question 8

What if they pay you back later after you wrote it off?

Answer 8

Then you have to recognize it as income.

Question 9

If you pay 90,000 for house and a year later the house burns down when it’s worth 70,000. How much is deductible.

Answer 9

You would deduct the 70,000.

Question 10

If it’s a business casualty you don’t have a 10% of AGI deduction, but you do if it’s a personal casualty?

Answer 10

True

Question 11

In a business casualty if the item is fully destroyed and your business bases is greater than your economic value (market value) you deduct what?

Answer 11

You deduct the base

Question 12

In a personal casualty do you deduct the economic value (market value) or base (what you bought it at)

Answer 12

You deduct the economic value

Question 13

DOMESTIC PRODUCTION ACTIVITIES

DEDUCTION

Answer 13

Put in place as an incentive to have jobs be in the US. A lot of companies outsource their labor in different countries. The domestic production activities deduction is an incentive to not do this.