Losses and Bad Debts

When property is disposed of, what factors influence the amount of the deductible loss? Define.

What is the importance, if any, of passive activity?

Compare and contrast the computational rules for deducting casualty losses on personal-use property with casualty losses incurred on business or investment property. Define the difference. What are the limitations for both?

Can you make response each posted below # 1 to 3.

1. From: Latosha Graham posted Jun 8, 2018 9:48 PM

When property is disposed of, what factors influence the amount of the deductible loss?

Whether it is a capital or ordinary loss and identify if the amount is a deduction for or from AGI.

What is the importance, if any, of passive activity?

Passive activity refers to any activity that involves the conduct of any trade or business, and in which the taxpayer does not materially participate. Passive activity also includes almost all rental activity.

Compare and contrast the computational rules for deducting casualty losses on personal-use property with casualty losses incurred on business or investment property. Define the difference. What are the limitations for both.

Personal property

  • reduce each casualty and theft loss by $100
  • the total of all casualty and theft losses for the year is reduce by 10% of AGI

Business/investment property

  • For AGI deductions
  • itemized deductions not subject to 2% of AGI floor

2. From: Carolyn Holland posted Jun 8, 2018 3:55 PM

When property is disposed of, what factors that influence the amount of deductible loss? If it is an ordinary loss or if is a capital loss influences the amount to be deducted. A determination of if the loss is a forAGI or a fromAGI also comes into the factors.

A loss from passive activity can be claimed against the passive income but cannot be claimed against the active income. Excess loss from passive activity can be carried to future years but cannot be carried back to previous years. Wealthy individuals use passive activities as a way of reducing their taxable income.

Casualty losses are only deductible for the amounts that are not reimbursed by insurance less $100 from each loss of personal property. The amount of loss cannot be greater than 10% of your AGI.

Casualty losses for a business is deductible for the adjusted basis in the property minus any salvage value minus any insurance monies received.

Casualty loss practice guide. (2014). AICPA tax section. Retrieved from

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=18&ved=0ahUKEwj4-Lak6cTbAhVQoFMKHZ7yA-8QFgiIATAR&url=https%3A%2F%2Fwww.aicpa.org%2FInterestAreas%2FTax%2FResources%2FCompliance%2FDownloadableDocuments%2Fcasualtylosspracticeguide-revised-2014.pdf&usg=AOvVaw2Lk1NvsVgDHcNHnEnSdPI9

Passive activity. (2018). Investopedia.Retrieved from

https://www.investopedia.com/terms/p/passiveactivity.asp

3. From: Rebecca Willis posted Jun 8, 2018 12:56 AM

Factors that influence the amount of the deductible of a loss are:

  1. Sale of the property.
  2. Seized, confiscated or condemned
  3. abandoned or demolition property
  4. depreciation value
  5. destruction
  6. theft

Passive activity is when the property did not materially participate.

Casualty loss is the outcome due to damage, obliteration or loss of property due to an identifiable event that is sudden, unexpected and unusual.

Losses of trade or business property used to produce rentals or royalties. Once the amount of the loss is determined subtract it from any reimbursements, the remainder is either a loss or gain.

Losses from stocks, bonds, gold and silver are casualty losses and are added to the itemized miscellaneous deductions.

Items of personal use property influence the deductible loss. Most common of these are theft and casualties.

 
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