Deck 10: Deductions and Losses: Certain Itemized Deductions

Question 1

Bill paid $2,500 of medical expenses for his daughter, Marie. Marie is married to John and they file a joint return. Bill
can include the $2,500 of expenses when calculating his medical expense deduction.

Answer 1

True

Question 2

Personal expenditures that are deductible as itemized deductions include medical expenses, Federal income taxes, state income taxes, property taxes on a personal residence, mortgage interest, and charitable contributions.

Answer 2

False

Question 3

Maria traveled to Rochester, Minnesota, with her son, who had surgery at the Mayo Clinic. Her son stayed at the clinic for the duration of his treatment. She paid airfare of $300 and $50 per night for lodging. The cost of Maria's airfare and lodging cannot be included in determining her medical expense deduction.

Answer 3

False

Question 4

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

Question 5

Jim's employer pays half of the premiums on a group medical insurance plan covering all employees, and employees pay the other half. Jim can exclude the half of the premium paid by his employer from his gross income and may include the half he pays in determining his medical expense deduction.

Question 6

In 2019, Rhonda received an insurance reimbursement for medical expenses incurred in 2018. She is not required to include the reimbursement in gross income in 2019 if she claimed the standard deduction in 2018.

Question 7

Mason, a physically handicapped individual, pays $10,000 this year for the installation of wheelchair ramps, support bars, and railings in his personal residence. These improvements increase the value of his personal residence by
$2,000. Only $8,000 of the expenditure qualifies as a medical expense for tax purposes.

Question 8

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.

Question 9

A physician recommends a private school for Ellen's dependent child. Because of the physician's recommendation, the cost of the private school will qualify as a medical expense deduction subject to percentage limitations).

Question 10

A taxpayer may not deduct the cost of new curbing relative to a personal residence), even if the construction is required by the city and the curbing provides an incidental benefit to the public welfare.

Question 11

Matt, a calendar year taxpayer, pays $11,000 in medical expenses in 2018. He expects $5,000 of these expenses to be reimbursed by an insurance company in 2019. In determining his medical expense deduction for 2018, Matt must reduce his 2018 medical expenses by the amount of the reimbursement he expects in 2019.

Question 12

Fees for automobile inspections, automobile titles and registration, bridge and highway tolls, parking meter deposits, and postage are not deductible if incurred for personal reasons, but they are deductible as deductions for AGI if incurred as a business expense by a self-employed taxpayer.

Question 13

In 2018, Brandon, age 72, paid $5,000 for long-term care insurance premiums. He may include the $5,000 in computing his medical expense deduction for the year.

Question 14

Georgia contributed $2,000 to a qualifying Health Savings Account in the current year. The entire amount qualifies as an expense deductible for AGI.

Question 15

Mindy paid an appraiser to determine how much a capital improvement made for medical reasons increased the value of her personal residence. The appraisal fee qualifies as a deductible medical expense.

Question 16

Upon the recommendation of a physician, Ed has a swimming pool installed at his residence because of a heart condition. If he is allowed to deduct all or part of the cost of the pool, Ed's increase in utility bills due to the operation of the pool qualifies as a medical expense.

Question 17

Chad pays the medical expenses of his son, James. James would qualify as Chad's dependent except that he earns
$7,500 during the year. Chad may claim James' medical expenses even if he is not a dependent.

Question 18

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 $167 in computing her medical expenses.

Question 19

Sergio was required by the city to pay $2,000 for the cost of new curbing installed by the city in front of his personal residence. The new curbing was installed throughout Sergio's neighborhood as part of a street upgrade project. Sergio may not deduct $2,000 as a tax, but he may add the $2,000 to the basis of his property.

Question 20

The election to itemize is appropriate when total itemized deductions are less than the standard deduction based on the taxpayer's filing status.

Question 21

For purposes of computing the deduction for qualified residence interest, a qualified residence includes the taxpayer's principal residence and two other residences of the taxpayer or spouse.

Question 22

For purposes of computing the deduction for qualified residence interest, a qualified residence includes only the taxpayer's principal residence.

Question 23

In April 2018, Bertie, a calendar year cash basis taxpayer, had to pay the state of Michigan additional income tax for 2017. Even though it relates to 2017, for Federal income tax purposes the payment qualifies as a tax deduction for tax year 2018.

Question 24

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

Question 25

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.

Question 26

Trent sells his personal residence to Chester on July 1, 2018. He had paid $7,000 in real property taxes on March 1, 2018, the due date for property taxes for 2018. Trent may not deduct the portion of the taxes he paid for the period the property was owned by Chester.

Question 27

For all of the current year, Randy a calendar year taxpayer) allowed the Salvation Army to use a building he owns rent-free. The building normally rents for $24,000 a year. Randy will be allowed a charitable contribution deduction this year of $24,000.

Question 28

In January 2019, Pam, a calendar year cash basis taxpayer, made an estimated state income tax payment for 2018. The payment is deductible in 2018.

Question 29

Herbert is the sole proprietor of a furniture store. He can deduct real property taxes on his store building as a business deduction but he cannot deduct state income taxes related to his net income from the furniture store as a business deduction.

Question 30

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.

Question 31

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.

Question 32

Grace's sole source of income is from a restaurant that she owns and operates as a proprietorship. Any state income tax Grace pays on the business net income must be deducted as a business expense rather than as an itemized deduction.

Question 33

Joe, a cash basis taxpayer, took out a 12-month business loan on December 1, 2018. He prepaid all $3,600 of the interest on the loan on December 1, 2018. Joe can deduct only $300 of the prepaid interest in 2018.

Question 34

Leona borrows $100,000 from First National Bank and uses the proceeds to purchase City of Houston bonds. The interest Leona pays on this loan is deductible as investment interest subject to the investment interest limits.

Question 35

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.

Question 36

On December 31, Lynette used her credit card to make a $500 contribution to the United Way, a qualified charitable organization. She will pay her credit card balance in January of the following year. If Lynette itemizes, she can deduct the $500 in the year she used the card.

Question 37

Tom, whose MAGI is $40,000, paid $3,500 of interest on a qualified student loan in 2018. Tom is single. He may deduct the $3,500 interest as an itemized deduction.

Question 38

Phyllis, who is single, has itemized deductions totaling $20,000. She overpaid her 2017 state income tax and is entitled to a refund of $400 in 2018. Phyllis chooses to apply the $400 overpayment toward her state income taxes for 2018. She is required to recognize that amount as income in 2018.

Question 39

Interest paid or accrued during 2018 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.

Question 40

Sadie mailed a check for $2,200 to a qualified charitable organization on December 31, 2018. The $2,200 contribution is deductible on Sadie's 2018 tax return if she itemizes her deductions.

Question 41

Excess charitable contributions that come under the 30%-of-AGI ceiling are always subject to the 30%-of-AGI ceiling in the carryover year.

Question 42

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

Question 43

Contributions to public charities in excess of 50% of AGI may be carried back 3 years or forward for up to 5 years.

Question 44

Fred and Lucy are married, ages 33 and 32, and together have AGI of $120,000 in 2018. They have four dependents and file a joint return. They pay $5,000 for a high deductible health insurance policy and contribute $2,600 to a qualified Health Savings Account. During the year, they paid the following amounts for medical care: $9,200 in doctor and dentist bills and hospital expenses, and $3,000 for prescribed medicine and drugs. In October 2018, they received an insurance reimbursement of $4,400 for the hospitalization. They expect to receive an additional reimbursement of $1,000 in January 2019. Determine the maximum itemized deduction allowable for medical expenses in 2018.

A) $800
B) $3,800
C) $9,200
D) $12,800
E) None of the above

Question 45

In order to dissuade his pastor from resigning and taking a position with a larger church, Michael, an ardent leader of the congregation, gives the pastor a new car. The cost of the car is deductible by Michael as a charitable contribution.

Question 46

Dan contributed stock worth $16,000 to his college alma mater, a qualified charity. He acquired the stock 11 months ago for $4,000. He may deduct $16,000 as a charitable contribution deduction subject to percentage limitations).

Question 47

This year Allison drove 800 miles to volunteer in a project sponsored by a qualified charitable organization in Utah. In addition, she spent $250 for meals while away from home. In total, Allison may take a charitable contribution deduction of $112 800 miles × $.14) relating to her volunteer work.

Question 48

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 2018 was $75,000. How much of these expenditures can Phillip deduct as a medical expense in 2018?

A) $14,000
B) $15,000
C) $23,375
D) $29,000
E) None of the above

Question 49

This year, Carol, a single taxpayer, purchased a vacation home for $400,000 using an equity debt of $350,000 on her principal residence. Carol has no other debt on her principal residence. Carol paid $16,000 of interest on the debt this year. How much of this interest is deductible assuming Carol itemizes her deductions?

A) $0
B) $10,000
C) $16,000
D) $125,000
E) None of the above

Question 50

During the year, Eve a resident of Billings, Montana) spends three consecutive weeks in Louisville, Kentucky. One week is spent representing the Billings First Christian Church at the national convention, and two weeks are spent vacationing with relatives. One third of Eve's travel expenses will qualify as a charitable deduction.

Question 51

Al contributed a painting to the Metropolitan Art Museum of St. Louis, Missouri. The painting, purchased six years ago, 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).

Question 52

Noah gave $750 to a good friend whose house was destroyed by an earthquake. In addition, Noah contributed his time, valued at $250, in the cleanup effort. Noah may claim a charitable deduction of $1,000 on his tax return for the current year.

Question 53

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.

Question 54

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 10%-of-AGI floor)?

A) $0
B) $6,000
C) $9,000
D) $15,000
E) None of the above

Question 55

Gambling losses may be deducted to the extent of the taxpayer's gambling winnings.

Question 56

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.

Question 57

Pedro's child attends a school operated by the church the family attends. Pedro made a donation of $1,000 to the church in lieu of the normal registration fee of $200. In addition, Pedro paid the regular tuition of $6,000 to the school. Based on this information, what is Pedro's charitable contribution?

A) $0
B) $800
C) $1,000
D) $6,800
E) $7,000

Question 58

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.

Question 59

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).

Question 60

Charitable contributions that exceed the percentage limitations for the current year can be carried over for up to three years.

Question 61

In the current year, Jerry pays $8,000 to become a charter member of Mammoth University's Athletic Council. The membership ensures that Jerry will receive choice seating at all of Mammoth's home basketball games. Also this year, Jerry pays $2,200 the regular retail price) for season tickets for himself and his wife. For these items, how much qualifies as a charitable contribution?

A) $0
B) $6,400
C) $8,000
D) $10,200
E) None of the above

Question 62

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 and 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?

A) $90,000
B) $120,000
C) $150,000
D) $180,000
E) None of the above

Question 63

During the current year, Ralph made the following contributions to the University of Oregon a qualified charitable organization): Cash $\quad$ $\quad$$\$ 63,000$
Stock in Raptor, Inc. (a publicly traded corporation) $\quad$ $\quad$ 94,500 Ralph acquired the stock in Raptor, Inc., as an investment fourteen months ago at a cost of $42,000. Ralph's AGI for the year is $189,000. What is Ralph's charitable contribution deduction for the current year?

A) $56,700
B) $63,000
C) $94,500
D) $157,500
E) None of the above

Question 64

Which of the following items would be an itemized deduction on Schedule A of Form 1040?

A) Professional dues paid by an accountant employed by Ford Motor Co.) to the National Association of Accountants.
B) Gambling losses to the extent of gambling winnings.
C) Job hunting costs.
D) Subscription to the Wall Street Journal.
E) None of the above.

Question 65

Emily, who lives in Indiana, volunteered to travel to Louisiana in March to work on a home-building project for Habitat for Humanity a qualified charitable organization). She was in Louisiana for three weeks. She normally makes $500 per week as a carpenter's assistant and plans to deduct $1,500 as a charitable contribution. In addition, she incurred the following costs in connection with the trip: $600 for transportation, $1,200 for lodging, and $400 for meals. What is Emily's deduction associated with this charitable activity?

A) $600
B) $1,200
C) $1,800
D) $2,200
E) $3,700