Deck 5: Itemized Deductions

Question 1

Taxpayers can deduct qualified residence interest on their principal residence and on a second residence selected by the taxpayer.

Answer 1

True

Question 2

A taxpayer receives a deduction for services rendered to a charitable organization.

Answer 2

False

Question 3

In 2014,Alan was required by his employer to use his car for work.His employer's mileage reimbursement was $0.25 per mile.If Alan's actual expenses are more than the reimbursement,he can deduct the excess amount on Schedule C

Answer 3

False

Question 4

Premiums paid for long-term care insurance policies may be deductible as medical expenses.

Question 5

For determination of deductibility,all personal casualty losses incurred during the year are added together and only one $100 floor amount is used to reduce the casualty deduction.

Question 6

In order to deduct a charitable contribution,taxpayers must itemize on their return.

Question 7

Prescription drugs obtained outside the United States,such as from Canada,are never deductible on a U.S.tax return.

Question 8

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

Question 9

If donated appreciated capital gain property is put to a use that is unrelated to the purpose or function of a charity's tax-exempt status,the contribution must be reduced by the amount of any long-term capital gain that would have been realized if the property had been sold at its fair market value at the time of the contribution.

Question 10

Personal casualty losses resulting from termite damage are deductible.

Question 11

Personal property taxes paid on personal-use assets,such as the family car,are deductible on Schedule A.

Question 12

For medical expenses,only expenses in excess of 7.5 percent of adjusted gross income are deductible.

Question 13

The cost of aspirin and over-the-counter cough medicine is a deductible medical expense even though they are nonprescription drugs.

Question 14

In 2013,Roxanne's nephew was her dependent.For 2014,he no longer qualifies as her dependent.However,she paid $650 in 2014 for medical expenses she incurred in 2013 when he was her dependent.Roxanne can include the $650 in figuring her medical expense deduction in 2014.

Question 15

Loan fees that are not "points",or prepaid interest,are deductible as interest on Schedule A.

Question 16

Cynthia makes weekly cash contributions of $30 to her church.She pays by check.Since her annual contributions to the church are more than $250,she must obtain a written acknowledgment from the church to support her contribution deduction.

Question 17

Theft losses are deducted in the tax year in which the theft was discovered,rather than the year of theft,if the discovery comes later.

Question 18

If an accountant in public accounting seeks work as a controller in private industry,the expenses of job hunting may be deductible.

Question 19

A taxpayer generally has the option of deducting foreign taxes paid on Schedule A or taking a foreign tax credit.

Question 20

Rick and Claudia live in an apartment and have purchased land where they plan to build their home.They have a mortgage on the lot and have received a Form 1098 from the lender showing the interest paid on the note.Interest paid on this loan is deductible as home mortgage interest on their Schedule A.

Question 21

Some contributions are limited to 50% of the taxpayer's AGI,others may be limited to a lower % of AGI.Deductions to which of the following organizations are subject to the 50% limitation on deductible contributions?

A)Churches and conventions of organizations of churches and educational organizations.
B)Hospitals and certain medical research organizations associated with these hospitals.
C)Rotary,Elks,and Lions Clubs who raise money for public causes.
D)Both a and b.

Question 22

In 2014,the Chens' pleasure boat was severely damaged by a hurricane in an area that was declared a federal disaster area.They had AGI of $110,000 in 2014.The following information relates to the craft: The Chens had insurance and received an $80,000 insurance settlement.
What is the allowable casualty loss deduction for the Chens in 2014?

A)$50,000.
B)$15,000.
C)$ 3,900.
D)$ 3,000.

Question 23

For 2014,high-income taxpayers do not have to forfeit part of their itemized deductions.

Question 24

Using the information in question 41,what is the amount of the charitable contribution carry forward for Sheila Jones?

A)$30,000.
B)$20,000.
C)$10,000.
D)$ 0.

Question 25

For the current year,Sheila Jones had adjusted gross income of $100,000.During the year,she contributed $6,000 to her church and an additional $3,000 to qualified charities.She also contributed religious artwork with a fair market value of $60,000 and a basis of $20,000 to her church.The church intends to display the religious artwork in the church foyer.If Sheila chooses to itemize her deductions,what is the amount of her deductible charitable contribution?

A)$ 9,000.
B)$20,000.
C)$39,000.
D)$49,000.

Question 26

Which of the following organizations do not qualify for deductible charitable contributions?

A)The Red Cross.
B)A political party.
C)Religious organizations.
D)All of the above.

Question 27

During 2014 Shakira paid the following expenses: What is the total amount of medical expenses (before application of the adjusted gross income limitation)that would enter into the calculation of itemized deductions on Shakira's 2014 income tax return?

A)$ 525.
B)$1,325.
C)$1,500.
D)$1,575.

Question 28

Which of the following costs are deductible on Form 1040,Schedule A,as taxes? 1.Real estate taxes on property owned in Mexico.
2)Property tax portion of vehicle registration,based on the value of the auto.
3)Fine for speeding.
4)Personal property tax on a pleasure boat.

A)1,2,and 4.
B)3 and 4.
C)None of the items are deductible.
D)All of the items are deductible.

Question 29

If one or more non-cash gifts has a fair market value over $500,the taxpayer must:

A)Attach a written explanation to the Form 1040.
B)Complete Schedule D.
C)File Form 8283.
D)Attach a letter from the recipient organization.

Question 30

In 2014,the U.S.President declared a federal disaster in California due to wild fires.Helen lives in the affected area and lost her home in the fires.What choice does she have regarding when she can claim the loss on her tax return?

A)It must be claimed in 2013 if the return has not been filed by the date of the loss.
B)It must be claimed in 2014 if the loss is greater than Helen's modified adjusted gross income.
C)It may be claimed in 2015 if an election is filed with Helen's 2014 return.
D)It may be claimed in either 2013 or 2014.

Question 31

Cynthia lives in California,a state that imposes a tax on income.The following information relates to Cynthia's state income taxes for 2014: Taxes withheld in 2014 $3,000
Refund received in 2014 from 2013 tax return 300
Assessment paid in 2014 on the 2012 tax return 800
Assuming she elects to deduct state and local income taxes,what amount should Cynthia use as an itemized deduction for state and local income taxes for her 2014 federal income tax return?

A)$1,100.
B)$2,700.
C)$3,800.
D)$4,100.

Question 32

For investment interest expense in 2014,the deduction by a taxpayer is:

A)Limited to the investment interest expense paid in 2014.
B)Limited to the taxpayer's net investment income for 2014.
C)Not limited.
D)Limited to the taxpayer's gross investment income for 2014.

Question 33

In the past,high-income taxpayers' itemized deductions have been reduced by the lower of 3% of the excess of AGI over the applicable amount or 80% of the itemized deductions otherwise allowable for the tax year.For 2014,this limitation on the amount of itemized deductions for high-income taxpayers is back in effect.

Question 34

Which of the following interest expenses incurred by Amanda is treated as personal interest expense and,therefore,not deductible as an itemized deduction?

A)Interest expense on personal credit cards.
B)Bonds purchased with accrued interest.
C)Interest on a home mortgage acquired in 2005.
D)Interest expense incurred by a partnership in which Amanda is a limited partner.

Question 35

Which of the following may not be deducted either totally or partially as medical expenses? (Disregard any limitations which may apply.)

A)$3,000 to a family physician for medical care.
B)$1,000 long-term care insurance.
C)$600 for eyeglasses.
D)$300 for maternity clothes.

Question 36

Abel's car was completely destroyed in an accident that was his fault.His loss was $8,500 and his insurance company reimbursed him $6,500.What amount of casualty loss can Abel claim on his return (before deduction limitations)?

A)$ 0
B)$2,000
C)$6,500
D)$8,500

Question 37

Maria is single and age 32.In 2014,she had AGI of $35,000.During the year,she incurred and paid the following medical costs: What is Maria's medical expense deduction (after application of the adjusted gross income limitation)for her 2014 tax return?

A)$3,500.
B)$3,215.
C)$2,615.
D)$ 0.

Question 38

Taxes deductible as an itemized deduction include all of the following except:

A)Personal property taxes based on the value of the property.
B)Taxes that the taxpayer paid on property owned by his/her parents or children.
C)State and local income taxes.
D)Real estate taxes based on the assessed value of the property.

Question 39

For 2014,Jorge,a single father,reported the following amounts relating to his investments: Net investment income from interest $7,000
Interest expense on a loan to purchase stocks 2,000
Interest expense on funds borrowed in 2013 to purchase land for investment 6,000
What is the maximum amount that Jorge can deduct in 2014 as investment interest expense?

A)$1,000.
B)$2,000.
C)$6,000.
D)$7,000.

Question 40

Which of the following expenses is not deductible as medical expense?

A)Insulin used for diabetes.
B)Wig purchased upon the advice of a physician for the mental health of a patient who has lost all of his/her hair from disease.
C)Swimming lessons,recommended by a doctor for improvement of general health.
D)Acupuncture used to treat migraines.

Question 41

If the donation is greater than $250,what kind of written acknowledgment must the taxpayer obtain from the recipient organization?

Question 42

Which of the following miscellaneous itemized deductions is not subject to the 2% of adjusted gross income limitation?

A)Unreimbursed employee business expenses.
B)Gambling losses up to the amount of gambling winnings.
C)Union or professional dues and subscriptions.
D)Tax return preparation fees.

Question 43

Explain the change in the tax treatment regarding the limitation of itemized deductions for high-income taxpayers.
The high income limitation on itemized deductions was phased out from 2006 through 2009.For 2014,this limitation on the amount of itemized deductions for high-income taxpayers is back in effect.High-income taxpayers' itemized deductions will be reduced by the lower of 3% of the excess of AGI over the applicable amount or 80% of the itemized deductions otherwise allowable for the tax year.

Question 44

Which of the following miscellaneous deductions are subject to the 2% of adjusted gross income limitation?

A)Unreimbursed employee business expenses.
B)Investment counsel and advisory fees.
C)Safe deposit box fees.
D)All of the above.

Question 45

How is the medical expense deduction calculated? How is it limited?

Question 46

How does the declaration of a federally declared disaster area benefit the taxpayer concerning a casualty loss?

Question 47

Explain the key exception to the general rule concerning the charitable deduction for the contribution of tangible personal property.

Question 48

What is the proper treatment for prescription drugs obtained from sources outside the United States,such as Canada,that have been prescribed by a physician for the treatment of a medical condition and the FDA has approved that they can be legally imported?

Question 49

What are the general limits or floors placed on deductible personal casualty losses?

Question 50

On April 3rd,Megan discovers that her diamond broach has been stolen.The broach had a fair market value and adjusted basis of $15,000.The broach was not covered by Megan's insurance policy and her adjusted gross income for the year was $65,000.What would be her casualty loss deduction for the year?

Question 51

What is home equity indebtedness and how does it differ from acquisition indebtedness? Are there any limits to the deductibility of home equity loan interest?

Question 52

What is qualified residence interest? Are there any limits to the deductibility of qualified residence interest?

Question 53

Donations to what types of organizations are tax deductible?

Question 54

What is usually the largest miscellaneous itemized deduction category? Does it require any special treatment?

Question 55

In 2014,Allen's pleasure boat was destroyed by a flood.He had purchased the boat in 2011 for $45,000.On what form(s)will Allen report this loss?

A)Form 4684,Casualties and Thefts,and Schedule A,Itemized Deductions.
B)Form 4684,Casualties and Theft,and Schedule D,Capital Gains and Losses.
C)Form 4797,Sales of Business Property and Involuntary Conversions,and Schedule D,Capital Gains and Losses.
D)On the first page of Form 1040.

Question 56

What are four major categories of deductible taxes for individual returns?

Question 57

Describe the concept of a 10% floor for medical deductions.

Question 58

When are travel costs deductible as medical costs? How are medical travel costs calculated?

Question 59

Which of the following expenses is deductible,but subject to the 2% limitation on Form 1040,Schedule A,Job Expenses and Most Other Miscellaneous Itemized Deductions?

A)A blue suit for an accountant.
B)Appraisal fees on the sale of a personal residence.
C)Uniforms for a UPS delivery person.
D)The cost of hauling tools to work in the trunk of a car.

Question 60

In order for a personal property tax to be deductible as an itemized deduction,what three tests are required?

Question 61

Which of the following costs are potentially deductible on Form 1040,Schedule A as taxes for 2014? 1.Property tax on principal residence.
2)Garbage pickup itemized on the real estate bill.
3)Real estate tax on property owned as an investment.

A)None of the items.
B)2 and 3.
C)1 and 3.
D)All of the items.

Question 62

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

Question 63

In 2014,the U.S.President declared a federal disaster due to the flooding in North Carolina.Dan lives in that area and lost his home in the flood.What choice does he have regarding when he can claim the loss on his tax return?

A)It must be claimed in 2013 if the return has not been filed by the date of the loss.
B)It must be claimed in 2014 if the loss is greater than the modified adjusted gross income.
C)It may be claimed in 2015 if an election is filed with the 2014 return.
D)It may be claimed in 2013 or 2014.

Question 64

The cost of a chiropractor's services does not qualify as a medical deduction.

Question 65

The standard business mileage rate for automobiles for all of 2014 is 56 cents per mile.

Question 66

Which of the following organizations qualify for deductible charitable contributions?

A)Churches.
B)State political organizations.
C)Both a and b.
D)None of the above.

Question 67

In 2014,Maria who is 43,had adjusted gross income of $27,000,paid the following medical expenses: Prescription medicines $275
Dentist and doctor expenses 1,350
Health insurance premiums 400
Two pair of eyeglasses 185
What amount can Maria deduct as medical expenses (after the adjusted gross income limitation)in calculating her itemized deductions for 2014?

A)$2,710.
B)$2,025.
C)$ 685.
D)$ 0.

Question 68

Malika and Henry's vacation home was completely destroyed by fire.They had no insurance to the cover the loss.On which of the following forms would they report their loss?

A)Form 4684,Casualties and Thefts,and Form 1040,US.Individual Income Tax Return,as an adjustment to gross income.
B)Schedule A,Itemized Deductions,only.
C)Form 4684,Casualties and Thefts,and Schedule A,Itemized Deductions.
D)Form 4684,Casualties and Thefts,only.

Question 69

The interest paid on a loan used to acquire municipal bonds is deductible as investment interest expense.

Question 70

Marty and Cindy are married and both are professors at a local college.They contribute money to various organizations each year and file a joint return.Their adjusted gross income for 2014 is $100,000.They contributed to the following organizations in 2014: • $3,500 to the Sierra club
• $10,000 to the Red Cross
• $2,000 to a local political candidate
• $11,000 to cancer research foundation
• Donated clothing to Goodwill.(Marty purchased
The items for $850,but the thrift shop value of the
Same items at a local second-hand store is equal to $60.)
How much can Cindy and Marty deduct as charitable contributions for the year 2014?

A)$26,560.
B)$26,500.
C)$25,710.
D)$24,560.

Question 71

Generally,the taxpayer may deduct the cost of medical expenses on Schedule A for which of the following?

A)Doctor prescribed birth control pills.
B)Controlled substances like marijuana that are in violation of federal law.
C)Trips for general health improvement.
D)Marriage counseling.

Question 72

The adjusted gross income limitation on casualty losses is 7.5 percent.

Question 73

Which of the following statements is true regarding documentation requirements for charitable contributions?

A)If the total deduction for all noncash contributions for the year is more than $500,Section A of Form 8283,Noncash Charitable Contributions,must be completed.
B)A noncash contribution of less than $250 must be supported by a cancelled check,or a receipt,or other written acknowledgement from the charitable organization.
C)A contribution charged to a credit card is considered a cash contribution for purposes of documentation requirements.
D)All of the above are true.

Question 74

Which of the following is deductible as a miscellaneous itemized deduction?

A)Job-hunting expenses.
B)Union dues.
C)Professional dues and subscriptions.
D)All of the above are considered miscellaneous deductions.

Question 75

Juan paid the following amounts of interest in 2014: $150 on his personal credit card
$9,500 on his home mortgage
$750 on a personal car loan,which was not used for business
$350 on funds borrowed to purchase tax-exempt securities
What is his deductible interest for 2014?

A)$ 350.
B)$1,250.
C)$9,500.
D)$9,850.

Question 76

What is the maximum amount of personal residence acquisition debt on which interest is fully deductible?

A)$1,000,000.
B)$ 500,000.
C)$ 250,000.
D)$ 0.

Question 77

The threshold amount for the deductibility of allowable medical expenses for those under 65 in 2014 is:

A)10% of AGI.
B)10% of taxable income.
C)7.5% of AGI.
D)7.5% of taxable income.

Question 78

Premiums paid for long-term care insurance are not deductible as medical expenses.

Question 79

The Frazins had adjusted gross income of $140,000 in 2014.During the year,their principal residence was severely damaged by a house fire.The pertinent financial information is as follows: Cost basis = $134,000
Value before casualty = $156,000
Value after casualty = $20,000
The Frazins had some insurance and in 2014 reached a settlement with the insurance company for $110,000 insurance settlement.What is their allowable casualty loss deduction for 2014?

A)$ 9,900.
B)$23,900.
C)$36,000.
D)None of the above.

Question 80

Shanika lives in California which imposes a state tax on income.For 2014,Shanika had the following transactions related to her state income taxes: State taxes withheld in 2014 $3,500
Refund received in 2014 of 2013 tax 600
Assessment paid in 2014 of 2013 tax 750
Shanika plans to itemize on her 2014 return.What amount of state and local taxes should Shanika deduct in calculating itemized deductions for her 2014 federal income tax return?

A)$ 750.
B)$3,500.
C)$4,250.
D)$4,850.