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ord increases and decreases in the fair value of an investment when accountants do not record increases and decreases in the fair

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter11: Investor Losses

Section: Chapter Questions

Problem 1CPA: Which of the following statements regarding passive activity losses is true? a. A net passive...

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Answer the following questions in depth .... Why do accountants have to classify items as capital or revenue expenditures? Why do you treat exchanges of similar and dissimilar assets differently? Aren't they all exchanges? Is it true that the higher the depreciation, the lower the net income? If that is the case, why would we not want the lowest depreciation method so we can show the highest net income? Why do we have various methods of depreciation? Isn't that encouraging misleading results?
How is a business activity distinguished from an investment activity? why is this distinction important for the purpose of calculating federal income taxes? What types of losses may potentially be characterized as passive losses?
Why might the decision to own rather than lease real estate have an unfavorable effect on the corporation’s financial statements?
Which of the following statements regarding passive activity losses is true? a. A net passive activity loss may be deducted against wages. b. Losses on rental property are always considered passive. c. A passive activity is one in which the taxpayer does not materially participate. d. Expenses related to passive activities may be deducted from passive activity income and portfolio income.
In relation to investments and fair value, what are the two categories of investments that companies would normally report?
If it loses significant influence over the associate, the balance of the investment in the associate is recorded at:A. Fair valueB. Identifiable net asset propertyC. Cost methodD. Keep the equity method
When using the fair value method, we adjust the reported amount of the investment for changes in fair value after its acquisition. How is the change in fair value reflected in the income statement?
If an associate incurs losses, the investor is required to________. Select one: a. recognise the losses only to the point where the carrying amount of the investment is equal to zero b. reclassify the investment as current assets c. recognise the losses only to the point where the carrying amount of the investment is equal to the initial investment d. ignore the losses for the purposes of equity accounting adjustments
Which of the following capital losses can be used to offset a capital gain made from the sale of an investment property? Select one:Capital loss made on the sale of a rare coinCapital loss made on the sale of a main residenceCapital loss made on the sale of a boatCapital loss made on the sale of sharesCapital loss made on the sale of an artwork
Which of the following statements is false? A For tax purposes, companies can use the MACRS depreciation method. B When you change a depreciation estimate, such as salvage value, you need to make an adjustment to retained earnings. C If the expected future cash flow is less than the carrying amount, the asset is considered impaired. D If an impairment loss is recorded, depreciation must be recalculated since the book value changed.
Which of the following statements is false? A For tax purposes, companies can use the MACRS depreciation method. B When you change a depreciation estimate, such as salvage value, you need to make an adjustment to retained earnings. C If the expected future cash flow is less than the carrying amount, the asset is considered impaired. D If an impairment loss is recorded, depreciation must be recalculated since the book value changed. The answer A is wrong
Why is IAS 36 Impairment of Asset not applied to an investment property measured under the fair value model in accordance with IAS 40 Investment Properties? Provide answers to the questions raised by the finance assistant in accordance with relevant accounting standards.