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Exam 10: Deductions and Losses: Certain Itemized Deductions

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Question 21

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Shirley sold her personal residence to Mike for $400,000.Before the sale,Shirley paid the real estate taxes of $7,030 for the calendar year.For income tax purposes,the deduction is apportioned as follows: $4,000 to Shirley and $3,030 to Mike. a.What is Mike's basis in the residence? b.What is Shirley's amount realized from the sale of the residence? c.What amount of real estate taxes can Mike deduct? d.What amount of real estate taxes can Shirley deduct?

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Question 22

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Judy paid $40 for Girl Scout cookies and $40 for Boy Scout popcorn.Judy may claim an $80 charitable contribution deduction.

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B) False

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Question 23

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Capital assets donated to a public charity that would result in long-term capital gain if sold,are subject to the 30%-of-AGI ceiling limitation on charitable contributions for individuals.

Charles,who is single and age 61,had AGI of $400,000 during 2015.He incurred the following expenses and losses during the year. Medical expenses before 10%-of-AGI limitation $39,500 State and local income taxes 5,200 Real estate taxes 4,400 Home mortgage interest 5,400 Charitable contributions 4,800 Casualty loss before 10% limitation (after $100 floor) 47,000 Unreimbursed employee expenses subject to 2%-of-AGI limitation 8,900 Gambling losses (Charles had $7,400 of gambling income) 9,800 Compute Charles's total itemized deductions for the year.

Dan contributed stock worth $16,000 to his college alma mater,a qualified charity.He acquired the stock eleven months ago for $4,000.He may deduct $16,000 as a charitable contribution deduction (subject to percentage limitations).

Jack sold a personal residence to Steven and paid points of $3,500 on the loan to help Steven finance the purchase.Jack can deduct the points as interest.

Linda,who has AGI of $120,000 in the current year,contributes stock in Mauve Corporation (a publicly traded corporation) to the Salvation Army,a qualified charitable organization.The stock is worth $65,000,and Linda acquired it as an investment four years ago at a cost of $50,000. a.What is the total amount that Linda can deduct as a charitable contribution,assuming she carries over any disallowed contribution from the current year to future years? b.Describe the restrictions that apply when calculating the deduction in the carryover years.

Edna had an accident while competing in a rodeo.She sustained facial injuries that required cosmetic surgery.While having the surgery done to restore her appearance,she had additional surgery done to reshape her chin,which was not injured in the accident.The surgery to restore her appearance cost $9,000 and the surgery to reshape her chin cost $6,000.How much of Edna's surgical fees will qualify as a deductible medical expense (before application of the AGI limitation) ?

Maria made significant charitable contributions of capital gain property in the current year.In fact,the amount of the contributions exceeds 30% of her AGI.The excess charitable contribution that is not deductible this year can be carried over for five years.

Brad,who would otherwise qualify as Faye's dependent,had gross income of $9,000 during the year.Faye,who had AGI of $120,000,paid the following medical expenses in 2015: Cataract operation for Brad $ 5,400 Brad's prescribed contact lenses 1,800 Faye's doctor and dentist bills 12,600 Prescribed drugs for Faye 2,550 Total $22,350 ​ Assuming Faye is age 45,she has a medical expense deduction of:

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.

Shirley pays FICA (employer's share) on the wages she pays her maid to clean and maintain Shirley's personal residence.The FICA payment is not deductible as an itemized deduction.

For calendar year 2015,Jon and Betty Hansen (ages 59 and 60) file a joint return reflecting AGI of $280,000.They incur the following expenditures: Medical expenses before AGI floor $30,000 Casualty loss (not covered by insurance) before statutory floors 30,000 Interest on home mortgage 10,000 Interest on credit cards 800 Property taxes on home 13,000 Charitable contributions 17,000 State income tax 15,000 Tax return preparation fees 1,200 What is the amount of itemized deductions the Hansens may claim?

Rick and Carol Ryan,married taxpayers,took out a mortgage of $160,000 when purchasing their home ten years ago.In October of the current year,when the home had a fair market value of $200,000 and they owed $125,000 on the mortgage,the Ryans took out a home equity loan for $110,000.They used the funds to purchase a sailboat to be used for recreational purposes.The sailboat does not qualify as a residence.What is the maximum amount of debt on which the Ryans can deduct home equity interest?

Phillip,age 66,developed hip problems and was unable to climb the stairs to reach his second-floor bedroom.His physician advised him to add a first-floor bedroom to his home.The cost of constructing the room was $32,000.The increase in the value of the residence as a result of the room addition was determined to be $17,000.In addition,Phillip paid the contractor $5,500 to construct an entrance ramp to his home and $8,500 to widen the hallways to accommodate his wheelchair.Phillip's AGI for 2015 was $100,000.How much of these expenditures can Phillip deduct as a medical expense in 2015?

Paul,a calendar year married taxpayer,files a joint return for 2015.Information for 2015 includes the following: AGI $175,000 State income taxes 13,500 State sales tax 3,000 Real estate taxes 18,900 Gambling losses (gambling gains were $12,000) 6,800 Paul's allowable itemized deductions for 2015 are:

Brian,a self-employed individual,pays state income tax payments of: $900 on January 15,2015 (4th estimated tax payment for 2014) $1,000 on April 15,2015 (1st estimated tax payment in 2015) $1,000 on June 16,2015 (2nd estimated tax payment in 2015) $1,000 on September 15,2015 (3rd estimated tax payment in 2015) $800 on January 15,2016 (4th estimated tax payment of 2015) Brian had a tax overpayment of $500 on his 2014 state income tax return and applied this to his 2015 state income taxes.What is the amount of Brian's state income tax itemized deduction for his 2015 Federal income tax return?

Interest paid or accrued during the tax year on aggregate acquisition indebtedness of $2 million or less ($1 million or less for married persons filing separate returns) is deductible as qualified residence interest.

Hannah makes the following charitable donations in the current year: Basis Fair Market Value Inventory held for resale in Hannah's business (a sole proprietorship) $8,000 $ 7,200 Stock in HBM,Inc. ,held as an investment (acquired four years ago) 16,000 40,000 Baseball card collection held as an investment (acquired six years ago) 4,000 20,000 ​ 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:

Points paid by the owner of a personal residence to refinance an existing mortgage must be capitalized and amortized over the life of the new mortgage.