Chapter 7 Part 2

Question 1

If personal casualty losses exceed personal casualty gains, all gains and losses are treated as _____.

Answer 1

ordinary items

Question 2

The gains - and the losses to the extent of gains- are treated as _______ or _____ in computing AGI.

Answer 2

Ordinary Income

Ordinary Loss

Question 3

Losses in excess of gains are deducted as ________ to the extent the losses ______

Answer 3

Itemized deductions

exceed 10% of AGI

Question 4

A ______ in a particular tax year would produce no tax benefit if the Code did not provide for the carryback and carryforward of such losses to profitable years.

Answer 4

Net Operating Losses (NOL)

Question 5

To provide partial relief from this ineqitable tax treatment, a deduction is allowed for NOLs. This provisino permits NOLs for any one year to be ________ of other years

Answer 5

offset against taxable income

Question 6

An NOL generally must be applied initially to the 2 taxable years _____ the year of the loss (unless an election is made not to cary the loss back at all.)

Answer 6

Preceding

*It is carried 1st to the second prior year and then to the immediately preceding tax year (or until used up)

Question 7

If the loss is not fully used in the carryback period, it must be carried forward to the first year after the loss year, then to the next…. the carryover period is ______

Answer 7

20 years.

Question 8

A 3 year carryback period is available for any portion of an individual’s NOL resulting from ________

A 3 year carryback period also applies to NOLs that are attributable to ______ that are incurred by a small business. A small busines is a bussiness whose average annual gross recipets for a 3 year period are $5 mil or less

Answer 8

a casualty or theft loss.

presidentially declared disasters

Question 9

A 5 year carryback period and a 20 year carryover period are allowed for

Answer 9

farming loss

Question 10

A taxpayer can ______ not to carry back an NOL to any of the prior years. In that case, the loss is available as ______

Answer 10

irrevocably elect

a carryover for 20 years

Question 11

Casualty and theft losses incurred by an individual in connection with a trade or business are __________. These losses are not subject to the _____ and the _____ limitations

Answer 11

deductible for AGI

$100 per event and the 10% of AGI

Question 12

Casualty and theft losses incurred by an employee in connection with a trade or business are ________ if the loss is reimbursed by the employer. If the loss is not reimbursed, the loss is ______.

Answer 12

deductible for AGI

deductible from AGI as a miscellaneous itemized deductino subject to the 2% of AGI floor.

Question 13

A _____ is the recognized gain from a casualty or theft of personal use property. A _____ for this purpose is a casualty or theft loss of personal use property after the application of the $100 floor.

Answer 13

Personal casualty gain

Personal casualty loss

Question 14

A taxpayer who has both gains and losses for the taxable year must first net the personal casualty gains and personal casualty losses. If the gains exceed the losses, the gains and losses are treated as _______. The capital gains and losses are short-term or long-term, depending on the period the taxpayer held each of the assets. In the netting process, personal causalty and theft gains and losses are not netted with the gains and losses on business and income-producing property.

Answer 14

gains and losses from the sale of capitl assets.