Question 1

The cost of aspirin and decongestants is a deductible medical expense even though they are non- prescription drugs.

Accepted Answer

Non-prescription drugs like aspirin and decongestants are generally not considered deductible medical expenses according to IRS guidelines.

Question 2

A taxpayer may donate the free use of property to a charitable organization and deduct the value as an itemized deduction.

Accepted Answer

The IRS does not allow a deduction for the value of services or the use of property. A taxpayer can only deduct out-of-pocket expenses related to the donation of their services or the use of their property.

Question 3

Premiums paid for life insurance policies are deductible as medical expenses.

Accepted Answer

Premiums paid for life insurance policies are not deductible as medical expenses, except in certain limited circumstances such as when a portion of the premium pays for long-term care insurance.

Question 4

Casualty and theft losses must be reduced by amounts recovered from insurance coverage.

Accepted Answer

Casualty and theft losses are reduced by amounts recovered from insurance coverage to prevent the taxpayer from receiving a deduction greater than their actual loss.

Question 5

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

Accepted Answer

The answer of Individual taxpayers may carry forward indefinitely charitable...

Question 6

The amount of a special assessment charged to residents for the installation of sidewalks on their street is not deductible on Schedule A as property taxes.

Accepted Answer

The special assessment charged for sidewalks is not considered a property tax and therefore cannot be deducted as such on Schedule A.

Question 7

Mortgage interest on a taxpayer's personal residence is not deductible on Schedule A.

Accepted Answer

Mortgage interest on a taxpayer's personal residence is deductible on Schedule A, subject to certain limitations.

Question 8

For 2013,the investment interest expense deduction is limited to the taxpayer's net investment income.

Accepted Answer

This is correct according to IRS publication 550 which states that for 2013, the investment interest expense deduction is limited to the taxpayer's net investment income.

Question 9

To deduct interest paid with respect to indebtedness,the taxpayer must be legally liable for the debt.

Accepted Answer

The tax code requires that the taxpayer must be legally liable for the debt in order to deduct interest paid on that debt. This means that the taxpayer either signed a contract or agreement assuming responsibility for the debt, or is responsible for the debt under the terms of a divorce decree or property settlement. Interest paid on debt that the taxpayer is not legally liable for is not deductible.

Question 10

To calculate the amount of state and local income taxes which may be deducted as an itemized deduction,state income taxes paid during the year must be reduced by state income tax refunds received during the year.

Accepted Answer

The answer of To calculate the amount of state and...

Question 11

The cost of a fishing license is considered a personal property tax and is deductible as an itemized deduction.

Accepted Answer

The cost of a fishing license is not considered a personal property tax and therefore cannot be deducted as an itemized deduction.

Question 12

If personal property is completely destroyed,the casualty loss deduction is still reduced by a floor amount.

Accepted Answer

The casualty loss deduction is subject to a floor amount that is subtracted from the total loss amount. Even if the personal property is completely destroyed, this floor amount still applies.

Question 13

If a taxpayer contributes a painting to a museum but reserves the right to use the painting for parties,he may not be allowed a deduction for the charitable contribution.

Accepted Answer

In order for a donation to be considered a charitable contribution for tax deduction purposes, the donor must relinquish all control and ownership of the gifted item. By reserving the right to use the painting for parties, the donor still retains some control and therefore may not be eligible for a deduction.

Question 14

In 2013,state income taxes may be deducted as an itemized deduction on Schedule A.

Accepted Answer

State income taxes can be deducted on Schedule A as an itemized deduction in 2013. However, starting from 2018, the State and Local Tax (SALT) deduction, which includes state income taxes, is limited up to $10,000 per return.

Question 15

The interest paid on a loan used to acquire municipal bonds is not deductible.

Accepted Answer

The interest paid on a loan used to acquire municipal bonds is not tax-deductible according to the Internal Revenue Service (IRS). This is because the interest income generated from owning municipal bonds is typically tax-free, so allowing the deduction of the related interest expense would result in double tax benefits.

Question 16

The cost of a chiropractor's services qualifies as a medical deduction.

Accepted Answer

According to the IRS, expenses for medical care that are necessary may be deducted on a tax return. Chiropractic care is generally considered a necessary medical expense and therefore qualifies as a medical deduction.

Question 17

The adjusted gross income AGI)limitation on medical expenses is 15 percent.

Accepted Answer

The AGI limitation on medical expenses is actually 7.5 percent for tax years 2017 and 2018. In 2019 and later tax years, it has increased to 10 percent.

Question 18

If real property is sold during the year,the property taxes must be allocated between the buyer and seller based on the number of days the property was held by each party.

Accepted Answer

This is true to ensure that each party pays their fair share of property taxes for the time they owned the property.

Question 19

If business property is fully destroyed as a result of a casualty,the loss is equal to the decrease in the fair market value of the property.

Accepted Answer

The loss is equal to the property's adjusted basis minus any salvage value. It is not necessarily equal to the decrease in fair market value.

Question 20

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

Accepted Answer

The answer of Taxpayers must itemize their deductions to be...

Quiz 5: Itemized Deductions and Other Incentives