Deck 11: Itemized Deductions

Question 1

On a sale of real property, if the buyer pays the real estate taxes for the entire year, the seller will be denied any deduction for these property taxes.

Answer 1

False

Question 2

If the principal reason an individual is in a nursing home is the availability of needed medical care, the entire cost of the medical care qualifies as a medical deduction.

Answer 2

False

Question 3

Medical expenses incurred during 2012 but not paid until 2013 can be deducted in either year, but not both.

Answer 3

False

Question 4

On a sale of real property, if the buyer pays the real estate taxes for the entire year, the seller's amount realized must be increased to reflect that portion of the taxes attributable to the seller.

Question 5

The prepayment of medical expenses qualifies as a current deduction only if the taxpayer is required to make the payment as a condition of receiving the medical services.

Question 6

State and local sales taxes do not qualify as deductible taxes.

Question 7

Federal income taxes related solely to the taxpayer's trade or business income are allowed as a deduction in arriving at adjusted gross income.

Question 8

No deduction is allowed for the cost of cosmetic surgery unless it is necessary to ameliorate a congenital deformity, a personal injury arising from an accident or trauma, or a disfiguring disease.

Question 9

Foreign income taxes paid by an individual may either be deducted as an itemized deduction or claimed as a credit against the taxpayer's U.S.income tax.

Question 10

A taxpayer who deducted $900 of medical expenses last year must include in gross income no more than $900 of any medical expense reimbursement received this year.

Question 11

Even though the seller of real property pays the real estate taxes for the entire year, the buyer will be allowed to deduct his or her share of these property taxes.

Question 12

The cost of meals and lodging while en route to a medical facility is allowed as a medical expense deduction.

Question 13

The medical expenses of a child of divorced parents are deductible only by the custodial parent.

Question 14

The buyer's basis of real property purchased will include any portion of the real estate taxes paid by the buyer that is attributable to the portion of the year the property was owned by the seller.

Question 15

A taxpayer who uses his or her personal automobile for medical transportation and does not want to calculate actual expenses is allowed a deduction of 55.5 cents a mile in 2012.

Question 16

If a doctor prescribes a swimming pool for a patient for medical reasons, the entire cost of the swimming pool is a deductible medical expense.

Question 17

Assuming the taxpayer itemizes deductions, medical expenses are deductible only to the extent that they exceed 7.5 percent of the taxpayer's adjusted gross income.

Question 18

Deductible medical expenses include all medical care insurance premiums paid by the taxpayer with after-tax dollars.

Question 19

Under certain circumstances, the medical insurance premiums of a sole proprietor may be deducted either for A.G.I.or from A.G.I.

Question 20

H and W have been divorced for two years.H paid for W's dental bills.W is otherwise self-supported.H may deduct W's dental bills as a medical expense.

Question 21

An employee's unreimbursed business expenses are treated as miscellaneous itemized deductions subject to a 2 percent of adjusted gross income floor.

Question 22

Charitable contributions of capital gain property subject to the 30 percent limitation can be converted to the 50 percent category if the taxpayer elects to reduce his or her claimed deduction by the property's unrealized appreciation.

Question 23

Any contributions in excess of the 50 percent limitation can be carried back three years and carried over five years.

Question 24

No deduction is allowed for interest paid on loans to purchase personal items such as clothes and household furniture.

Question 25

K purchased her residence several years ago for $80,000.The current balance of her mortgage loan is $60,000.During the year, she borrowed $125,000 from a savings and loan, and secured the loan with a second mortgage on her home, now worth $240,000.She may deduct the interest on the entire amount of debt related to her home if she uses the proceeds of the new loan to make permanent home improvements.

Question 26

T purchased his home for $100,000 five years ago.Although he has made no improvements to the home, it has appreciated considerably and is currently worth $175,000.Assuming T obtains a $30,000 second mortgage on his home and uses the proceeds to purchase a personal auto, the interest on such debt is deductible as long as he itemizes his deductions.

Question 27

A special assessment for paving a street is a deductible tax.

Question 28

A taxpayer who makes direct gifts to the children of a needy family will not be allowed a charitable contribution deduction.

Question 29

Like capital losses, an individual taxpayer's excess charitable contributions may be carried forward indefinitely.

Question 30

A deduction for charitable contributions is available only if a taxpayer itemizes his or her deductions.

Question 31

Norm is employed as an auditor by a large public accounting firm.He uses his car entirely for business.Interest on the loan used to purchase his car is entirely deductible.

Question 32

Ed Entry owns and operates his own public accounting firm as a sole proprietor.He uses his car entirely for business.Interest on the loan used to purchase his car is entirely deductible.

Question 33

Interest expense attributable to a loan on a life insurance policy may be deducted as long as the proceeds are used to purchase a new residence.

Question 34

Personal property taxes are deductible as an itemized deduction only if they are based on the value of the property.

Question 35

A taxpayer must always include his or her state income tax refund in income.

Question 36

The taxpayer's charitable deduction for any gift of capital gain property to a public charity is limited to the property's adjusted basis.

Question 37

On the condition that the city rezone the area to allow its commercial development, T donated a piece of property to the city to be used for the site of a new public school.T will be allowed a charitable contribution deduction for this gift.

Question 38

Interest expense attributable to a student loan is completely deductible assuming the proceeds are used to pay tuition and other related fees.

Question 39

All interest incurred on a mortgage loan secured by the taxpayer's principal residence is deductible.

Question 40

Unlike excess contributions subject to the 50 percent limitation, excess contributions subject to either the 20 or 30 percent limitations cannot be carried forward.

Question 41

Which one of the following expenses does not qualify as a deductible medical expense?

A)Tuition to a special school for a deaf child to learn lip reading
B)Cost of contact lenses
C)Cost and care of guide dog used by a blind person
D)Fees paid to attend a weight-loss program
E)Cost of motorized wheelchair and its maintenance

Question 42

T's A.G.I.for the current year is $20,000.Her medical expenses during the year were: $$\begin{array} { l l } \text { Aspirin, cold medicine, etc. } & \$ 125 \\\text { Prescription drugs } & 260 \\\text { Medical insurance premiums } & 1,000 \\\text { Doctors, dentists, etc. } & 3,200\end{array}$$ Assuming she is not reimbursed for any medical expenditures during the current year, T's medical expense deduction is

A)$2,700
B)$2,960
C)$3,085
D)$4,460
E)$4,585

Question 43

Which of the following contributions is allowed as a charitable contribution deduction?

A)Lost income associated with rent-free use of a taxpayer's property by a qualifying charity
B)Unreimbursed expenses incurred by the taxpayer in rendering services to a qualifying charity
C)The value of time or services rendered to a charitable organization
D)All of the above
E)None of the above

Question 44

Which one of the following would not be an allowable charitable deduction?

A)Costs of gasoline and parking incurred by a taxpayer using his or her own vehicle in connection with the charitable services
B)Cost and upkeep of a uniform used in rendering charitable services if it is not suitable for everyday use
C)Insurance and depreciation on an automobile used in connection with a charitable service
D)The standard mileage rate of 14 cents per mile for using an automobile in charitable activities
E)All of the above would be allowable charitable deductions.

Question 45

During 2012, D paid the following taxes which were not incurred in connection with a trade or business: Federal income taxes (withheld by employer) $\quad$$\$ 4,500$
FICA taxes (withheld by employer) $\quad$ 2,800
State income taxes (withheld by employer) $\quad$ 3,000
Federal gasoline taxes $\quad$ 350
Federal excise taxes on telephone bills $\quad$ 90 Assuming D itemized her deductions for Federal income tax purposes, the amount of deductible taxes are

A)$3,000
B)$4,200
C)$4,640
D)$7,440
E)$11,940

Question 46

D made the following payments during 2012: Interest on revolving charge accounts $\quad$$\$ 400$
Interest on original $\$ 140$ , 000 home mortgage $\quad$ 6,800
Interest on bank loan (proceeds of loan
were used to purchase state of New York
tax-exempted bonds) $\quad$ 3,100
Interest on credit union loan (proceeds
of loan were used for a family
vacation) $\quad 1,600$ How much of the above amounts may D deduct as an itemized deduction for interest expense on his Federal income tax return?

A)$6,800
B)$7,200
C)$8,800
D)$9,900
E)$11,900

Question 47

F's 2012 adjusted gross income is $42,000.F made the following charitable contributions in 2012: Cash contribution to church $\quad$$\$ 4,500$
Tickets to a public charity dinner
(the fair market value of the two
dinners was $\$ 100$ ) $\quad 2,000$
Donation of used household goods
to the Salvation Army (cost was $\$ 400$ ,
fair market value was $\quad$$\$ 150$ ) What is F's 2012 charitable contribution deduction (assuming he attended the charity dinner and itemizes his deductions)?

A)$4,750
B)$5,000
C)$6,550
D)$6,650
E)$6,900

Question 48

A medical expense deduction is allowed for all of the following items except

A)Treatment affecting any function of the body
B)Expenditures for prescription medicines or drugs
C)Expenses paid for transportation essential to the rendition of medical care
D)Expenses for health club membership
E)Medical care insurance premiums for taxpayer and dependents

Question 49

Mr.and Mrs.K purchased their current residence in 1998 for $100,000.Since that time they have added a room and made additional improvements costing $20,000.The current balance on the mortgage loan is $40,000 and the house is worth $200,000.The couple now wishes to obtain a new mortgage on their home and use the proceeds for a second honeymoon.The maximum mortgage loan that they could obtain for which all of the interest would be deductible is

A)$20,000
B)$60,000
C)$80,000
D)$100,000
E)$140,000

Question 50

T borrows $10,000 from his bank on April 1, primarily for expenses involved in starting a lawn-care business.T deposits the $10,000 in a money-market account with which he can write checks.T leaves the $10,000 untouched for the remainder of the year.The interest expense on T's loan will be classified as

A)Nondeductible interest
B)Qualified residence interest
C)Tax deferred interest expense
D)Investment interest expense
E)Personal interest expense

Question 51

To deduct a contribution to a charitable organization, the organization could be any one of the following except

A)A war veterans' organization
B)A corporation operated for scientific purposes
C)A nonprofit volunteer fire company
D)A needy family
E)A state-supported university

Question 52

Because of her doctor's prepayment policy, P used a bank credit card to pay for prenatal care in 2012, even though she will not have the baby until June, 2013.These medical expenses can be deducted

A)In 2012 even though she may pay the credit card account off in 2012 or later
B)In 2012 only if she pays off the bank card account in that year
C)In 2013 because that is the year the baby is born
D)In 2013 because it is assumed that this is the year the credit card account will be paid
E)Never, since prenatal care is not an allowable deductible medical expense

Question 53

D started a small business to make and sell Christmas tree ornaments.She imported most of the materials from Europe, used real gold, and used some very highly paid workers to assemble the ornaments.Her cost for each ornament was $500.She marketed them at $1,000 apiece and sold none.After Christmas, she marked them down to $475 and sold one.She donated the remaining twenty ornaments to her church.Disregarding any percentage limitation, how much may she deduct for this contribution?

A)$9,000
B)$9,500
C)$10,000
D)$20,000
E)None of the above

Question 54

Which of the following taxes qualifies as an itemized deduction for Federal income tax purposes?

A)State and local sales taxes
B)Tax assessments for sewer lines
C)State and local taxes on gasoline
D)State taxes on cigarettes
E)None of the above

Question 55

R paid the following state taxes during 2012: State income taxes due with his 2011 tax return $\quad$$\$ 700$
State income taxes withheld by his employer $\quad$ 2,500
Real estate taxes paid on personal residence $\quad$ 2,000
Personal property taxes based on value $\quad$$\quad$ 150
State auto license tax based on weight $\quad$$\quad$ 50 What amount should R deduct as taxes in calculating itemized deductions on his 2012 Federal income tax return?

A)$2,500
B)$3,200
C)$5,200
D)$5,350
E)$5,900

Question 56

Which of the following is not deductible as a charitable contribution?

A)Unreimbursed auto expenses on church business
B)Reasonable lodging costs while away from home overnight on business for a qualified charitable organization
C)Fair market value of appreciated stock held for five months and given to a church
D)Fair market value of used clothing given to the Salvation Army
E)Fair market value of land held as an investment for 10 years and given to a church

Question 57

On February 1, T borrowed $20,000.Of this amount, $9,000 is used to invest in a business on February 10 and $11,000 is used on February 15 to buy a Rolex watch.On April 30, he repaid $15,000.Of the repayment amount, how much reduces the portion allocated to investment?

A)$4,000
B)$5,000
C)$9,000
D)$11,000
E)None of the above amounts

Question 58

P, a single taxpayer, had $12,000 of deductible medical expenses in 2012.His 2011 A.G.I.was $24,000.His insurer reimbursed P for $11,000 of the expenses in 2013, and did not reimburse P for any expenses during 2012.If P deducted all of his allowable medical expenses on his 2012 return, how much of the reimbursement must be included in gross income for 2013 (P's itemized deductions for 2012 exceeded his standard deduction by $15,000.)

A)$0
B)$900
C)$10,000
D)$10,200
E)$11,000

Question 59

The real property taxes on R's house are computed on a calendar year basis and are due November 1st of each year.The realty taxes on R's house were $2,400 for 2012.R sold his house on June 1, 2012, before the property tax payment was due.How much of these real property taxes are apportioned to and deductible by R as an itemized deduction on R's 2012 Federal income tax return?

A)$0
B)$993
C)$1,407
D)$1,999
E)$2,400

Question 60

Z is a cash basis single taxpayer who itemizes her deductions.During 2012, Z had $4,000 in state income taxes withheld from her paycheck by her employer.She also paid the following estimated state income taxes for 2012: $$\begin{array} { l l } 4 / 15 / 2012 & \$ 600 \\6 / 15 / 2012 & 600 \\9 / 15 / 2012 & 600 \\1 / 15 / 2013 & 600\end{array}$$ What is Z's deduction for state income taxes on her 2012 Federal income tax return?

A)$5,200
B)$5,600
C)$5,800
D)$6,000
E)$6,400