Fundamentals of Taxation 2011 4th Edition by Ana Cruz, Debra Prendergast, Dan Schisler, Michael Deschamps

Exercise 54

Daryl, who has significant itemized deductions for 2010, purchased a new vehicle in 2009 for $27,000, with a state sales tax of 5 %, which he did not deduct on his 2009 tax return. Daryl also paid state income taxes of $4,100, which exceeds his allowable deduction for other incurred state sales taxes. Daryl's best option to maximize his tax savings in 2010 would be to: a. Deduct his total amount of allowable state sales tax deduction on Schedule A.
B) Simply take the standard deduction with the additional amount for the new car purchase sales tax.
C) Take the deduction for the state income taxes paid, as well as the sales tax paid on the on the new car purchase, on Schedule A.
D) Take only the deduction for state income taxes paid on the Schedule A.