Full file at https://testbankuniv.eu/Concepts-in-Federal-Taxation-2013-20th-Edition-Murphy-Solutions-Manual
2-52
Chapter 2: Income Tax Concepts
58. Explain why the loss resulting from the sale of a computer in the following three situations is treated differently for income tax purposes: The Business Purpose Concept limits the deductions of losses to those incurred in a trade or business or a production of income (investment) activity. Investment related losses are capital losses that are subject to the capital gain and loss rules. Net capital losses of individuals are deductible up to a maximum of $3,000 per year. Personal use losses are not deductible. a. Monica sells her personal computer at a loss of $1,300. None of the loss is deductible. The computer is a personal use asset. Losses on personal use assets are not deductible.
b. Omar sells a computer used in his carpeting business at a loss of $4,300. The loss is fully deductible. The computer is used in a trade or business. All losses incurred in a trade or business are deductible.
c. Jerry sells his computer at a loss of $3,800. Jerry used the computer to keep track of his investment portfolio. Only $3,000 of the loss is deductible. The computer is used in an investment activity. The $3,800 loss is a capital loss. If Jerry has no capital gains for the year, his capital loss deduction is limited to $3,000. The remaining $800 is carried forward for deduction in the next year.
Š 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Full file at https://testbankuniv.eu/Concepts-in-Federal-Taxation-2013-20th-Edition-Murphy-Solutions-Manual