Claudia, I thought that question was going to be tricky as well when I first looked at it. However, it's just asking for accumulated earning and profits which is just how it sounds. Accumulated profit. Add all income regardless of tax consequences and subtract all expenses and payments regardless of tax consequences.
Accumulated earnings and profits is necessary to determine the type of corporate distributions. That is where the tax stuff comes in. But anyways, you got it 🙂
csvirk, I have absolutely no idea. I got that question wrong too and never found out the answer. Anybody want to chime in and give us an answer in English?
My turn for another question:
Why is the correct answer not C? Correct answer is D. A personal car is definitely a capital asset and he definitely sold it for a $5,000 loss (doesn't show depreciation of any kind which is confusing but I ignored that). So, $3,000 should be deductible in the current year… Help!
Tom Lewis, an individual taxpayer, sold his personal automobile (never used for business purposes) for $5,000 in the current year. He purchased the automobile five years earlier for $10,000. Which of the following is the correct treatment of this transaction on Tom's current-year tax return (assuming that Tom's only other source of income was from wages)?
A.
Include $5,000 as miscellaneous income on his tax return.
B.
Deduct a $5,000 long-term capital loss on his tax return.
Incorrect C.
Deduct a $3,000 long-term capital loss on his current-year tax return, and carry over the remaining $2,000 to the next year.
D.
Show neither income nor loss from this transaction on his tax return.
FAR- 81
REG- 81
BEC- Aug 22, 2016
AUD- TBD
.