Question 1

For an individual taxpayer with AGI of $65,000, private mortgage insurance (PMI)is deductible in 2018.

Accepted Answer

The answer of For an individual taxpayer with AGI of...

Question 2

Gwen has written acknowledgments for each of the following charitable contributions during the current year: $\begin{array}{llcc}
  \text { Cash contributions to her church } & \$1,250 \
 \text {Contribution of used clothes and household items in good condition to  } &\
 \text { AMVETS, valued at thrift shop prices (original cost, $\$ 1,000$ ) } &\$200\
 \text { Gwen's estimate of the value of her time donated to a local soup kitchen } &\$800\
 \text { Cash donated to homeless people asking for money for food } &\$75\
\end{array}$

What is Gwen's charitable contribution deduction for the current year?

Accepted Answer

The answer of Gwen has written acknowledgments for each of...

Question 3

Which of the following charitable contributions is not tax deductible?

Accepted Answer

While cash donations and donations of goods and vehicles to qualified nonprofit organizations are tax deductible, volunteering or donating time is not deductible.

Question 4

Taxpayers must itemize their deductions to be allowed a charitable contribution deduction.

Accepted Answer

The answer of Taxpayers must itemize their deductions to be...

Question 5

Dongkuk uses his holiday bonus to pay his January 2019 mortgage payment in December 2018.The payment would normally be due January 31st.Dongkuk may deduct the interest paid as part of the early mortgage payment.

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The answer of Dongkuk uses his holiday bonus to pay...

Question 6

Which of the following types of interest are likely to be deductible in 2018?

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The answer of Which of the following types of interest...

Question 7

Douglas and Dena paid the following amounts of interest during the current year:​ $\begin{array}{llcc}
  \text {  Qualified home mortgage interest} &\$14,000  \
 \text { Other consumer interest } &\$5,000\
 \text {  Investment interest} &\$10,000\
 \text {  (no investment income)} &\
\end{array}$
 
a.Calculate the amount of their allowable deduction for investment interest for the current year.
b.Calculate the amount of Douglas and Dena's total allowable deduction for interest for the current year.

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The answer of Douglas and Dena paid the following amounts...

Question 8

Alice purchases a new personal auto and finances the purchase through the dealer.The interest of $760 she pays on the car loan during the current tax year is deductible.

Accepted Answer

Personal auto loan interest is not deductible on federal income tax returns, as the loan is not considered mortgage interest or investment interest.

Question 9

If a taxpayer contributes a painting to a museum but reserves the right to use the painting for parties, he may not be allowed a deduction for the charitable contribution.

Accepted Answer

If the taxpayer reserves the right to use the painting, it means that he has not completely given away the ownership of the painting to the museum. As a result, the contribution may not be considered a complete and unconditional charitable donation, and the taxpayer may not be eligible for a deduction.

Question 10

Stewart had adjusted gross income of $22,000 in 2018.During the year, he made the following contributions to qualified charities:- $7,000 cash- 1,000 shares of Able Corporation common stock, acquired in 1990 (cost and fair market value of $5,000)Considering the charitable contribution deduction limitation, what amount can Stewart claim as a deduction for charitable contributions in 2018?

Accepted Answer

Stewart can deduct cash contributions up to 60% of his AGI and appreciated stock up to 30% of his AGI. The cash contribution limit is $13,200 (60% of $22,000), and the stock contribution limit is $6,600 (30% of $22,000). Since the stock's fair market value is $5,000, he can deduct the full amount. Therefore, the total deduction is $7,000 (cash) + $5,000 (stock) = $12,000.

Question 11

Christine saw a television advertisement asking for donations of used vehicles to a charitable foundation and decided to donate her old car.Which of the following statements is correct?

Accepted Answer

Christine can claim an estimated value for the auto if the charity uses it rather than selling it. However, if the charity sells the vehicle, she can only claim the amount that the car was sold for. Option A is incorrect because she cannot claim a tax deduction equal to the amount she would have received if she sold the car directly. Option B is also incorrect because she cannot claim a deduction greater than the amount for which the charity actually sells the vehicle. Option D is incorrect because the charity is required to provide her with a receipt acknowledging the donation, which she can use as proof for tax purposes.

Question 12

Perry Mayson, a single taxpayer, graduated law school last year with quite a bit of qualified student loan debt and ends up paying $4,300 in interest on the loan in the current tax year.Fortunately, Perry is well compensated and earns adjusted gross income of $85,000 during the current year.Perry may deduct his student loan interest in the current year.

Accepted Answer

The student loan interest deduction is phased out for single taxpayers with an adjusted gross income between $70,000 and $85,000, and completely eliminated above $85,000. Perry's income exceeds this limit, so he cannot deduct the interest.

Question 13

A taxpayer may donate the free use of property to a charitable organization and deduct the value as an itemized deduction.

Accepted Answer

The IRS does not allow a deduction for the value of services or the use of property. A taxpayer can only deduct out-of-pocket expenses related to the donation of their services or the use of their property.

Question 14

For 2018, Eugene and Linda had adjusted gross income of $30,000.Additional information for 2018 is as follows. $$\begin{array} { l r } 
\text { Cash contribution to church } & \$ 1,600 \
\text { Tuition paid to a parochial school } & \$ 1,200 \
\text { Contribution to a qualified charity } & \$ 400 \
\text { Cash contribution to a needy family } & \$ 100
\end{array}$$ What is the maximum amount they can deduct for charitable contributions in 2018?

Accepted Answer

The answer of For 2018, Eugene and Linda had adjusted...

Question 15

Fran paid the following amounts of interest during 2018: $$\begin{array} { l r } 
\text { Qualified home mortgage interest } & \$ 7,000 \
\text { Automobile loan interest } & \$ 500 \
\text { Qualified interest on second residence } & \$ 5,000 \
\text { Credit card interest } & \$ 300
\end{array}$$ Calculate the amount of Fran's interest deduction for 2018.

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The answer of Fran paid the following amounts of interest...

Question 16

Andy borrows $20,000 to invest in bonds.During the current year, his interest on the loan is $2,000.Andy's interest income from the bonds is $400 and his investment expenses are $300.​
a.Calculate Andy's itemized deduction for investment interest for this year.
b.Is Andy entitled to a deduction in future years?

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The answer of Andy borrows $20,000 to invest in bonds.During...

Question 17

Sally and Jim purchased their personal residence in Santa Barbara 20 years ago for $150,000.The home has a fair market value today of $1,000,000.For the current year, they have a $10,000 first mortgage on their home, on which they paid $1,000 in interest.They also have a home equity loan secured by their home with a balance throughout the year of $110,000.The proceeds of the home equity loan were used to send their two children to college.They paid interest on the home equity loan of $5,500 for the year.Calculate the amount of their deduction for interest paid on qualified residence acquisition debt and qualified home equity debt for the current year.Qualified residence acquisition debt interest:Qualified home equity debt interest:

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The answer of Sally and Jim purchased their personal residence...

Question 18

Individual taxpayers may carry forward indefinitely charitable contributions that are not allowed as a deduction in the current year due to the adjusted gross income limitation.

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The answer of Individual taxpayers may carry forward indefinitely charitable...

Question 19

In 2018, Richie Rominey purchases a new $4.3 million qualified principal residence in Palo Alto, California using a mortgage loan of $3 million.Richie's mortgage interest deduction may be limited.

Accepted Answer

Starting in 2018, mortgage interest deductions are limited to interest paid on the first $750,000 of debt for newly purchased homes. Since Richie's mortgage loan is for $3 million, only a portion of his mortgage interest may be deductible.

Question 20

Melvin owns his home and has a $200,000 mortgage related to his purchase of the residence.In the fall of the current year, he borrows $40,000 on credit cards for college costs for his two sons.The interest expense on the mortgage is $15,000 and the interest expense on the credit cards is $6,000.How much of the interest is deductible as an itemized deduction and why?

Accepted Answer

The answer of Melvin owns his home and has a...

Quiz 5: Deductions and Adjustments to Income