For Each of the Following Situations, Determine Whether the Item

question 40

Essay

For each of the following situations, determine whether the item is deductible, how it would be deducted on the taxpayer's return (if there are alternatives possible, discuss the conditions that would determine the treatment) and any limitations, which might be placed on the deduction.
a.Allison is self-employed. She pays the following taxes during the current year: $$\begin{array} { l r } \text { State income tax } & \$ 1,200 \\\text { Federal income tax } & 4,000 \\\text { Self-employment tax } & 3,200 \\\text { Property tax on residence } & 700 \\\text { Tax on business equipment } & 200\end{array}$$
b.A customer who owed Leon $5,000 declared bankruptcy last year. At that time, the customer's accountant estimated that only 40% of the customer's debts would be paid. In the current year, Leon receives $1,000 from the bankruptcy court as final payment on the $5,000 debt.

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Definitions:

Choleric

One of the four traditional temperaments; characterized by quickness to anger and aggressive or domineering tendencies.

Sanguine

Sanguine describes a personality type that is cheerful, optimistic, and confident.

Pensive

Reflective and thoughtful, often in a melancholy or solemn way.

Anxiety Disorders

A group of mental health conditions characterized by excessive fear or anxiety that affects a person's daily activities.