Instructions : Choose the best multiple choice answer and explain why you chose
ID: 2564283 • Letter: I
Question
Instructions : Choose the best multiple choice answer and explain why you chose the answer. MUST provide 2-3 sentence brief explanation and show all work. All sources must be noted.
PART A
Jim purchased a new business asset (three-year personalty) on July 20, 2016, at a cost of $80,000. Jim takes additional first-year depreciation Determine the cost recovery deduction for 2016.
a.
$40,000.
b.
$26,666.
c.
$53,332.
d.
$46,665.
e.
None of the above.
PART B
Sammy, who is single, has the following items for 2015:
Salary
$35,000
Interest income
3,000
Itemized deductions ($29,000 attributable to casualty loss)
(39,000)
What is Sammy’s NOL for 2016?
a.
$0.
b.
$1,000.
c.
$2,000.
d.
$25,000.
e.
None of the above.
a.
$40,000.
b.
$26,666.
c.
$53,332.
d.
$46,665.
e.
None of the above.
Explanation / Answer
Part A :- Answer- None of the above
Explanation:- cost recovery deduction for 2016 is calculated as follows:
($80,000÷3year personalty)*2 years= $53,333.33
Partp.of B:- $2,000
Explanation:-
Salary = 35000
InteresInterest income = 3000
Itemized deductions (39000)
Personal Exemption (4000)
Taxable Income = (5000)
Therefore: Excess of non-business deductions = 39000 - (35000+3000-4000) = $5000 which is over and the non - business Income of $3000.
The Sammy NOL for 2016 is $2000.