Question

In: Accounting

QUESTION 15 Martell incurred a net long-term capital loss of $4,000 and no short-term capital gains...

QUESTION 15

  1. Martell incurred a net long-term capital loss of $4,000 and no short-term capital gains or losses. Assuming his other income is $40,000, he will be able to deduct what amount?

    a.

    $2,400

    b.

    $4,000

    c.

    $2,000

    d.

    $3,000

QUESTION 16

  1. If the taxpayer qualifies under § 1033 (nonrecognition of gain from an involuntary conversion), makes the appropriate election, and the amount reinvested in replacement property is less than the amount realized, realized gain is:

    a.

    Recognized to the extent of realized gain.

    b.

    Permanently not subject to taxation.

    c.

    Recognized to the extent of the deficiency (amount realized not reinvested)

    d.

    Recognized to the extent of the amount reinvested in excess of the adjusted basis.

Solutions

Expert Solution

QUESTION 15
Martell incurred a net long-term capital loss of $4,000 and no short-term capital gains or losses. Assuming his other income is $40,000, he will be able to deduct what amount?
a. $2,400
b. $4,000
c. $2,000
d. $3,000 Correct if Martell don't have capital gains to offset the capital loss, he can use a capital loss as an offset to ordinary income, up to $3,000 per year and remaining 1000  will be carried forward to future tax years.
QUESTION 16
If the taxpayer qualifies under § 1033 (nonrecognition of gain from an involuntary conversion), makes the appropriate election, and the amount reinvested in replacement property is less than the amount realized, realized gain is:
a. Recognized to the extent of realized gain.
b. Permanently not subject to taxation.
c. Recognized to the extent of the deficiency (amount realized not reinvested) Correct If the amount reinvested in replacement property is less than the amount realized, realized gain is recognized to the extent of the deficiency. Deficiency is the shortfall in amount reinvested.
d. Recognized to the extent of the amount reinvested in excess of the adjusted basis.

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