Question

1. Answer T or F for the following questions

a) A taxpayer can deduct a realized loss on the sale of a personal use asset.

b) A taxpayer is in the business of selling illegal drugs. the cost of the drugs can be claimed (deducted) on his return.

c) Hobby losses (arising when expenses exceed revenue) are not deductible.

d) A vacation home is used personally for 20 days and rented out for 50 days. Any allocated rental expenses in excess of rental income can be deducted.

e) a nonbusiness bad debt will be deductible for AGI

f) If Section 1244 stock is sold at a gain, at least a portion of the gain's character will be ordinary.

g) Al, a calendar year taxpayer, purchases stock on Owl Corporation as an investment on December 1, 2013. n April 1, 2014, the stock becomes worthless. The taxpayer will recognize a short-term capital loss on his 2014 tax return.

h) Theft losses are always deductible in the year in which the theft occurs.

i) Net operating losses can only arise from trade/business losses.

Answer 1