18. LO. 4 Hazel sustained a loss on the theft of a painting. She had paid $ 20,000 for the painting, but it was worth $ 40,000 at the time of the theft. Evaluate the tax consequences of treating the painting as investment property or as personal use property.
32. LO. 1 Several years ago, John Johnson, who is in the lending business, loaned Sara $ 30,000 to purchase an automobile to be used for personal purposes. In August of the current year, Sara filed for bankruptcy, and John was notified that he could not expect to receive more than $ 4,000. As of the end of the current year, John has received $ 1,000. John has contacted you about the possibility of taking a bad debt deduction for the current year. Write a letter to John that contains your advice as to whether he can claim a bad debt deduction for the current year. Also prepare a memo for the tax files. John’ s address is100 Tyler Lane, Erie, PA 16563
47. LO. 7 Sam, age 45, is single. For 2014, he has the following items:
Business income $ 70,000
Business expenses 75,000
Alimony paid 12,000
Interest income 3,000
Itemized deductions 8,000
a. Determine Sam’ s taxable income for 2014.
b. Determine Sam’ s NOL for 2014.