1.Sean is in the business of buying and selling stocks and bonds. He has a bond of Green Corporation for which he paid $200,000. The bond is currently worth only $50,000. Discuss whether Sean can take a $150,000 loss for a business bad debt or for a worthless security.
2.On May 9, 2018, Calvin acquired 250 shares of stock in Hobbes Corporation, a new startup company, for $68,750. Calvin acquired the stock directly from Hobbes, and it is classified as § 1244 stock (at the time Calvin acquired his stock, the corporation had $900,000 of paid-in capital). On January 15, 2020, Calvin sold all of his Hobbes stock for $7,000. Assuming that Calvin is single, determine his tax consequences as a result of this sale.
3.Belinda was involved in a boating accident in 2020. Her speedboat, which was used only for personal use and had a fair market value of $28,000 and an adjusted basis of $14,000, was completely destroyed. She received $10,000 from her insurance company. Her AGI for 2020 is $37,000. What is Belinda’s casualty loss deduction (after any limitations)?
4.Heather owns a two-story building. The building is used 40% for business use and 60% for personal use. During 2020, a fire caused major damage to the building and its contents. Heather purchased the building for $800,000 and has taken depreciation of $100,000 on the business portion. At the time of the fire, the building had a fair market value of $900,000. Immediately after the fire, the fair market value was $200,000. The insurance recovery on the building was $600,000. The contents of the building were insured for any loss at fair market value. The business assets had an adjusted basis of $220,000 and a fair market value of $175,000. These assets were totally destroyed. The personal use assets had an adjusted basis of $50,000 and a fair market value of $65,000. These assets were also totally destroyed. If Heather’s AGI is $100,000 before considering the effects of the fire, determine her itemized deduction as a result of the fire. Also determine Heather’s AGI.
5.During 2020, Leisel, a single taxpayer, operates a sole proprietorship in which she materially participates. Her proprietorship generates gross income of $142,000 and deductions of $420,000, resulting in a loss of $278,000. The large deductions are due to the acquisition of equipment and the use of immediate expense and additional first-year depreciation to deduct all of the acquisitions. Can Leisel use all of this loss to offset other income she has? Explain.
Please complete the assigned problems using MS-Excel.
