Question

explain please!

1. Two years ago, Kenny loaned his friend Russell $5,000. In the current year, Russell paid Kenny S1,500 in final settlement of the loan; this is the only amount Russell ever paid on the loan. Kenny has $100,000 of salary and $5,000 of capital gains for the current year. What amount of the loss may he u a. SO b. $1,500 c. $3.000 d. $3,500 e . $5,000 _2. During the current year, Larry had art work worth $20,000 (cost basis of $15,000) completely destroyed when his storage unit flooded during a federal disaster. His current year salary is $30,000 and he has no other deductions. What is Larry's itemized deduction from the loss of the art, after applying all floors and other limitations? a. $20,000 b. $17,000 c. $12,000 d. $11,900 e. $0

Answer 1

ANSWER:

CORRECT ANSWER IS OPTION D=$3,500.

Total amount of loss

= Amount of loan - Amour received

=$5,000 - $1,500

=$3,500

The amount of capital gain is $5,000.

The amount of that may be used in the current year is minimum of total amount of loss ($3,500) or amount of capital gain($5,000). Thus, the amount of loss may be used in the current year is $5,000.

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