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Exam 10: Deductions and Losses: Certain Itemized Deductions

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Question 41

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A taxpayer pays points to obtain financing to purchase a second residence.At the election of the taxpayer, the points can be deducted as interest expense for the year paid.

A) True
B) False

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Question 42

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For calendar year 2019, Jon and Betty Hansen (ages 59 and 60) file a joint return reflecting AGI of $280,000.They incur the following expenditures: $\begin{array} { l r } \text { Medical expenses before 10\%-of-AGI floor } & \$ 30,000 \\\text { Casualty loss caused by electrical fire in their home } & 30,000 \\\text { Interest on home mortgage } & 11,000 \\\text { Interest on credit cards } & 800 \\\text { Property taxes on home } & 13,000 \\\text { Charitable contributions } & 17,000 \\\text { State income tax } & 15,000 \\\text { Tax return preparation fees } & 1,200\end{array}$ What is the amount of itemized deductions the Hansens may claim?

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For the medical expenses, the taxpayers ...

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Question 43

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Ronaldo contributed stock worth $12,000 to the Children's Protective Agency, a qualified charity.He acquired the stock 20 months ago for $7,000.He may deduct $7,000 as a charitable contribution deduction (subject to percentage limitations).

Al contributed a painting to the Metropolitan Art Museum of St.Louis, MO.The painting, purchased six years earlier, was worth $40,000 when donated, and Al's basis was $25,000.If this painting is immediately sold by the museum and the proceeds are placed in the general fund, Al's charitable contribution deduction is $25,000 (subject to percentage limitations).

Letha incurred a $1,600 prepayment penalty to a lending institution because she paid off the mortgage on her home early.The $1,600 is deductible as interest expense.

In January 2020, Pam, a calendar year cash basis taxpayer, made an estimated state income tax payment for 2019. The payment is deductible in 2019.

Brian, a self-employed individual, pays state income tax payments of: $900 on January 15, 2019 (4th estimated tax payment for 2018) $1,000 on April 16, 2019 (1st estimated tax payment in 2019) $1,000 on June 17, 2019 (2nd estimated tax payment in 2019) $1,000 on September 16, 2019 (3rd estimated tax payment in 2019) $800 on January 15, 2020 (4th estimated tax payment of 2019) Brian had a tax overpayment of $500 on his 2018 state income tax return and applied this to his 2019 state income taxes.What is the amount of Brian's state income tax itemized deduction for his 2019 Federal income tax return?

Joe, who is in the 32% tax bracket this year, expects to retire next year and be in the 22% tax bracket.He plans to donate $50,000 to his church.Because he will not have the cash available until next year, Joe donates land (long- term capital gain property) with a basis of $10,000 and fair market value of $50,000 to the church in December of the current year.He reacquires the land for $50,000 in February of the next year.Discuss Joe's tax objectives and all tax issues related to his actions.

This year Dena traveled 600 miles for specialized medical treatment that was not available in her hometown.She paid $90 for meals during the trip, $145 for a hotel room for one night, and $15 in parking fees.She did not keep records of other out-of-pocket costs for transportation.Dena can include $180 in computing her medical expenses.

Pat gave 5,000 shares of stock in Coyote Corporation (a publicly traded corporation) to her church (a qualified charitable organization) in the current year.The stock was worth $180,000.She had acquired it as an investment four years ago at a cost of $120,000.She reported AGI of $300,000 for the year.In completing her current income tax return, how much is her current-year charitable contribution deduction?

Employee business expenses for travel may be deducted as itemized deductions if they are not reimbursed.

Manny, age 57, developed a severe heart condition, and his physician advised him to install an elevator in his home. The cost of installing the elevator was $17,000, and the increase in the value of the residence was determined to be $5,800. Manny’s AGI for the year was $52,000. a. How much of the expenditure can Manny deduct as a medical expense? b. Assume the same facts as in part a. except that Manny was paralyzed in an automobile accident and the expenditures were incurred to build entrance and exit ramps and widen the hallways in his home to accommodate his wheelchair. How much of the expenditure can Manny deduct as a medical expense?

Matt, a calendar year taxpayer, pays $11,000 in medical expenses in 2019.He expects $5,000 of these expenses to be reimbursed by an insurance company in 2020.In determining his medical expense deduction for 2019, Matt must reduce his 2019 medical expenses by the amount of the reimbursement he expects in 2020.

Hannah makes the following charitable donations in the current year: $\begin{array} { l r r } & \text { Basis } & \begin{array} { r } \text { Fair Market } \\\text { Value }\end{array} \\\begin{array} { l } \text { Inventory held for resale in Hannah's business (a } \\\text { sole proprietorship) }\end{array} & \$ 8,000 & \$ 7,200 \\\begin{array} { l } \text { Stock in HBM, Inc., held as an investment } \\\text { (acquired four years ago) }\end{array} & 16,000 & 40,000 \\\begin{array} { l } \text { Baseball card collection held as an } \\\text { investment (acquired six years ago) }\end{array} & 4,000 & 20,000\end{array}$ The HBM stock and the inventory were given to Hannah's church, and the baseball card collection was given to the United Way.Both donees promptly sold the property for the stated fair market value.Disregarding percentage limitations, Hannah's current charitable contribution deduction is:

Adrienne sustained serious facial injuries in a motorcycle accident.To restore her physical appearance, Adrienne had cosmetic surgery.She cannot deduct the cost of this procedure as a medical expense.

In 2019, Boris pays a $3,800 premium for high-deductible medical insurance for himself and his family.In addition, he contributes $3,400 to a Health Savings Account.Which of the following statements is true?

Tom, age 48, is advised by his family physician that he needs back surgery to correct a problem from his last back surgery.Since Tom is in a wheel chair, he needs his wife, Jean, to accompany him on his trip to Rochester, MN, for in-patient treatment at the Mayo Clinic, which specializes in this type of surgery.Tom incurred the following costs in 2019: $\begin{array} { l r } \text { Round-trip airfare (\$350 each) } & \$ 700 \\\text { Jean's hotel in Rochester for four nights (\$95 per night) } & 380 \\\text { Jean's meals while in Rochester } & 105 \\\text { Tom's medical treatment } & 3,500 \\\text { Tom's prescription medicine } & 600\end{array}$ Compute Tom's allowable medical expenses for the trip (before application of the AGI floor) .

In Piatt County, the real property tax year is the calendar year.The real property tax becomes a personal liability of the owner of real property on January 1 and is payable on July 1 in the real property tax year.On June 30 of this year (assume it is not a leap year), Harry sells his house to Judy for $110,000 and on July 1, Judy pays the entire real estate tax of $4,380 for the current year ending December 31. a.How much of the property taxes may Harry deduct? b.How much of the property taxes may Judy deduct?

Zeke made the following donations to qualified charitable organizations during the year: $\begin{array}{c}\begin{array}{lll}\text {Used clothing of taxpayer and his family (all acquired}\\\text { more than a year ago) }\\\text {Stock in ABC, Inc., held as an investment for 15 }\\\text {months}\\\text {Stock in MNO, Inc., held as an investment for 11}\\\text { months}\\\text {Real estate held as an investment for two years}\end{array}\begin{array}{lll}\text {Basis}&\text { Fair Market Value}\\ \$ 1,350 &\$375\\\\12,000&10,875\\\\15,000&18,000\\\\15,000&30,000\end{array}\end{array}$ The used clothing was donated to the Salvation Army? the other items of property were donated to Eastern State University.Both are qualified charitable organizations.Disregarding percentage limitations, Zeke's charitable contribution deduction for the year is:

During the year, Victor spent $300 on bingo games sponsored by his church.If all profits went to the church, Victor has a charitable contribution deduction of $300.