Question 1

For a 21-year-old child to be considered a dependent in 2018:

Accepted Answer

The requirements to be considered a dependent in 2018 are that the child must either have an income less than $4,150 or be a full-time student for at least 5 months during the year. Therefore, either option (b) or (c) would make the child eligible to be claimed as a dependent.

Question 2

Which of the following statements is true regarding the deductibility of investment interest expense?

Accepted Answer

Investment interest expense is deductible only to the extent of net investment income. Any excess can be carried forward indefinitely, allowing taxpayers to potentially deduct the excess in future years when they have sufficient net investment income.

Question 3

Sonjay had AGI of $60,000 in 2018 and made several charitable contributions as follows: Land donated to county for new school: FMV = $30,000; basis = $20,000
Appraisal fee for the land: $2,500
Contributions to his church: $4,000
Contributions to the Red Cross: $1,000
What is the maximum charitable contribution deduction that Sonjay could claim in 2018?

Accepted Answer

The answer of Sonjay had AGI of $60,000 in 2018...

Question 4

Ikito's AGI was $68,000 in 2017 and 2018. His home was broken into and his TV, DVD, VCR and computer were all stolen. The properties had a basis of $15,000 and a current fair market value of $9,000. Later that year, his car was hit by a garbage truck. It cost Ikito $9,000 to have the car repaired. Ikito didn't believe in insurance, so he received no reimbursements. In addition, the garbage company filed for bankruptcy after the accident. How much may Ikito deduct as an itemized deduction if these events occurred in 2018 and if they instead happened in 2017, respectively??

Accepted Answer

The answer of Ikito's AGI was $68,000 in 2017 and...

Question 5

All of the following are qualifying relatives who can qualify as dependents except:

Accepted Answer

While B, C, and D are all qualifying relatives for dependency purposes, a cousin is not considered a qualifying relative unless they meet the criteria of a dependent relative.

Question 6

In 2018, Carol, who is 54 and single, earned a salary of $54,000 and $6,000 of interest on State of Nevada bonds. She contributed $2,000 to her Roth IRA, paid a $12,000 hospital bill, state income taxes of $1,500, real estate taxes of $900, mortgage interest of $4,500, and $2,000 interest on her margin account under which she purchased the bonds. What is Carol's taxable income?

Accepted Answer

The answer of In 2018, Carol, who is 54 and...

Question 7

Vera and Jake (both age 45) are a married couple with AGI of $327,300 for 2018. They paid $20,000 of mortgage interest, $8,000 of unreimbursed medical expenses, $4,000 of property taxes, and $9,000 of charitable contributions for the year. How much may they claim for itemized deductions in 2018?

Accepted Answer

The answer of Vera and Jake (both age 45) are...

Question 8

To qualify as a dependent, most individuals (except a qualifying child) must earn gross income that is less than an amount equal to:

Accepted Answer

To qualify as a dependent, most individuals (except a qualifying child) must earn gross income that is less than the personal exemption amount.

Question 9

Patricia's AGI was $80,000 in both 2017 and 2018. She made cash contributions to public charities of $43,000 in 2017 and $50,000 in 2018. Patricia's charitable contribution carryover to 2019 is:

Accepted Answer

The answer of Patricia's AGI was $80,000 in both 2017...

Question 10

Camila, age 60, is single and has adjusted gross income of $100,000. She paid (with after-tax dollars) the following medical expenses in 2018:  She received only $2,000 in reimbursements from her insurance company for her medical expenses. How much can Camila deduct for medical expenses in 2018 if she has $30,000 of other itemized deductions?

Accepted Answer

The answer of Camila, age 60, is single and has...

Question 11

Amelia, an accountant, normally bills her clients $125 per hour for her time and her adjusted gross income for 2018 was $100,000. In January and February 2018, however, Amelia spent 80 hours of her time volunteering for the Salvation Army doing accounting work. She paid $100 out of her own pocket for supplies and made an additional cash contribution of $1,000 to the Salvation Army in 2018.What is Amelia's charitable contribution deduction for 2018?

Accepted Answer

Amelia can deduct the actual expenses she incurred while volunteering, which in this case is the $100 she spent on supplies. She can also deduct the value of her time spent volunteering at the rate she normally charges her clients, which would be $10,000 (80 hours x $125/hour). However, she cannot deduct the value of her time as a charitable contribution, only the actual expenses she incurred. In addition, her cash contribution of $1,000 to the Salvation Army is also deductible. Therefore, her total charitable contribution deduction is $1,100 ($100 + $1,000).

Question 12

Colin (age 40) is single and itemizes his deductions. His AGI is $100,000. Colin provided the following information about his cash expenditures for 2018: Interest on loan to purchase corporate securities $ 900
Interest on American Express card 1,200
Points to refinance his home at the end of December 2,600
Mortgage interest payments 11,800
Real estate taxes 2,100
State income taxes withheld on salary 5,400
Additional state income tax estimated payment 1,200
Contribution to Republican Party 2,000
Contribution to United Way 500
What is Colin's deduction for taxes?

Accepted Answer

Colin's deduction for taxes is $8,700. This includes the $5,400 of state income taxes withheld on his salary, the $1,200 of additional state income tax estimated payment, and the $2,100 of real estate taxes.

Question 13

Justin, age 42 and divorced, is the sole support of his mother, age 69, who resided in a local nursing home for the entire year. Justin's mother had no income for the year. Justin's filing status is:

Accepted Answer

Although Justin is divorced, he can still be considered as "unmarried" for tax purposes if he meets certain requirements. He can file as head of household if he paid more than half of the cost of keeping up a home for the entire year, and if the home was the main home for his mother, who is considered a "qualifying person" due to her age and lack of income. This filing status generally results in a lower tax liability than filing as single or married filing separately.

Question 14

Emma purchased investment land in 2012 for $46,000. At the end of 2017, she was approached by the local Girl Scout organization in which she had been an active troop leader, about donating the land for a summer camp site. Emma agreed and deeded the land to the Girl Scouts for their camp in February 2018. The fair market value of the land at the end of 2017 was $55,000 and in February 2018 was $56,000. Emma's adjusted gross income was $100,000 for 2017 and $110,000 for 2018. Emma expects her AGI to decrease to $10,000 in 2019 because most of her future retirement income will be from tax-exempt sources. What is the maximum amount Emma can deduct for 2018 if this is her only itemized deduction?

Accepted Answer

The answer of Emma purchased investment land in 2012 for...

Question 15

Colin (single and age 40) has AGI of $100,000. Colin provided the following information about his cash expenditures for 2018: Interest on loan to purchase corporate securities $ 900
Interest on American Express card 1,200
Points to refinance his home for 10 years at the end of December 2,600
Mortgage interest payments 11,800
Real estate taxes 2,100
State income taxes withheld on salary 5,400
Additional state income tax estimated payment 1,200
Contribution to Republican Party 2,000
Contribution to United Way 500
If Colin does not itemize, what is his total deduction from AGI in 2018:

Accepted Answer

For 2018, the standard deduction for a single filer like Colin is $12,000. Since he does not itemize, he would take the standard deduction.

Question 16

What is Beth's maximum allowable deduction for the following contributions to qualified public charities during the current year if her adjusted gross income is $90,000?

Accepted Answer

The maximum allowable deduction for cash contributions to qualified public charities is limited to 60% of the taxpayer's adjusted gross income (AGI). Therefore, Beth's maximum allowable deduction for the current year would be 60% of $90,000, which is $54,000. However, she must also subtract any other charitable contributions subject to different limitations, such as contributions of appreciated property or contributions to private foundations. As we don't have this information, the lowest possible correct answer is C, which is the closest to $54,000 without going over it.

Question 17

Cleo's husband died in January of 2016. She has a 20 year-old son and a sister who live with her. Her son attends a trade school part-time and earned $11,000 from his part-time job. Cleo's sister is a full-time student and only earned $2,800 from her part-time job. What is Cleo's 2018 filing status?

Accepted Answer

Cleo can file as head of household since she has a dependent (her son) who lived with her for more than half the year, and she provided more than half the cost of keeping up the home. As her husband passed away in 2016, she cannot file as a surviving spouse. Since her husband passed away in 2016, she cannot file as married filing jointly or married filing separately. She also cannot file as single since she has a dependent living with her.

Question 18

Which of the following is true regarding miscellaneous itemized deductions?

Accepted Answer

All of the statements are true. A) Other investment expenses and tax return preparation fees are indeed categorized as miscellaneous itemized deductions. B) The Tax Cuts and Jobs Act of 2017 suspended the deduction for miscellaneous itemized deductions for the years 2018 through 2025. C) Before 2018, miscellaneous itemized deductions were subject to the 2% floor, meaning they were only deductible to the extent that they exceeded 2% of the taxpayer's adjusted gross income (AGI).

Question 19

All of the following are a common filing status for a married person except:

Accepted Answer

The answer of All of the following are a common...

Question 20

John and Mary have three children: Aaron (age 14), Anna (age 16), and Tammy (age 21). Anna works after school and earned $4,000 in 2018. Tammy works 30 hours per week and is a part-time student at the local community college earning $8,400 in 2018. If John and Mary's AGI in 2018 is $200,000, how much can they claim on their joint tax return for the child tax credit?

Accepted Answer

The child tax credit is available for children under the age of 17. Aaron and Anna qualify, but Tammy does not because she is over 17. The credit is $2,000 per qualifying child, so they can claim $4,000 for Aaron and Anna.

Quiz 5: Deductions for Individuals and Tax Determination