Taxes: Deductions - Losses and Bad Debts Flashcards Preview

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Flashcards in Taxes: Deductions - Losses and Bad Debts Deck (4)
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1

Taxes:
Deductions - Losses and Bad Debts
Losses

Losses:
- losses on business assets can be deducted
- losses on personal assets cannot unless personal casualty
- part business/part personal treated as two separate assets
Worthless Securities
- totally worthless
- treated as if sold for nothing on last day of year
- character is usually capital
- except corporate investments in 80% owned affiliate, then OL

2

Taxes:
Deductions - Losses and Bad Debts
Bad Debts

Bad Debts
- only use direct writeoff ,method
- loans to extent partially worthless
- nonbusiness bad debts also deductible
- whether disguised gift depends on interest charged
- deductible as STCL in year completely worthless

3

Taxes:
Deductions - Losses and Bad Debts
Limitations on Deduction of Losses

Limitations on Deduction of Losses
- not section 1231 or investment assets subject to capital asset rules
- if losses > gains = limit $3,000 for individuals
- special rules for section 1244 capital stock

4

Taxes:
Deductions - Losses and Bad Debts
Net Operating Losses

Net Operating Losses
- back 2 and forward 20
- only business and casualty loss

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