ACCT M50 PRINCIPLES OF INCOME TAXATION PRACTICE EXAM | FREE SOLVED ANSWERS
In 2024, the president of the United States declared a federal disaster due to brush fires in the Southwest. Lisa lives in that area and lost her home in the fires. What choice does she have regarding when she can claim the loss on her tax return?
In 2024, the president of the United States declared a federal disaster due to brush fires in the Southwest. Lisa lives in that area and lost her home in the fires. What choice does she have regarding when she can claim the loss on her tax return?
Multiple Choice
a. It must be claimed in 2023 if the retum has not been filed by the date of the loss
b. It may be claimed in 2025 if an election is filed with the 2024 return
c. It may be claimed in 2023 or 2024.
d. It must be claimed in 2023 if the loss is greater than her Modified Adjusted Gross Income.
Correct Answer: C. It may be claimed in 2023 or 2024.
Explanation: When a taxpayer incurs a loss from a federally declared disaster, they have the option to claim the loss in the tax year the disaster occurred or in the tax year immediately preceding the disaster year. In this case, since the disaster occurred in 2024, Lisa can choose to claim the loss on her 2024 tax return or amend her 2023 tax return to claim the loss in that year. This allows for potential tax benefits sooner if the loss is claimed in the prior year.
ACCT M50 PRINCIPLES OF INCOME TAXATION PRACTICE EXAM FREE SOLVED ANSWERS