Question 1

Meade paid $5,000 of state income taxes in 2013.The total sales tax he paid during 2013 was $4,500,which included $3,000 for the cost of a new boat.How should Meade treat the taxes paid in his 2013 tax return?

Accepted Answer

The answer of Meade paid $5,000 of state income taxes...

Question 2

Gwen has written acknowledgments for each of the following 2013 charitable contributions.
 Cash contributions to her church $\quad \$ 1,250$
Contribution of old clothes and household goods to AMVETS, valued at 
thrift shop prices (original cost, $\$ 1,000$ ) $\quad\$ 200$
Gwen's estimate of the value of her time donated to a localsoup kitchen $\quad \$ 800$ Cash 
donated to homelesspeople asking for moneyfor food $\quad$$\quad$$50 What is Gwen's 2013 charitable contribution deduction?

Accepted Answer

The answer of Gwen has written acknowledgments for each of...

Question 3

In 2013,Jennie receives $12,000 of which $3,000 is earnings)from a Qualified Tuition Program.She uses the funds to pay for new furniture for her apartment.What amount is taxable to Jennie?

Accepted Answer

The amount that is taxable is only the portion used for non-qualified expenses, which in this case is $9,000 ($12,000 total minus $3,000 used for qualified tuition). Therefore, the correct answer is C.

Question 4

Sally and Jim purchased their personal residence in Santa Barbara 20 years ago for $150,000.The home has a fair market value today of $1,000,000.For the current year,they have a $10,000 first mortgage on their home,on which they paid $1,000 in interest.They also have a home equity loan secured by their home with a balance throughout the year of $110,000.The proceeds of the home equity loan were used to send their two children to college.They paid interest on the home equity loan of $11,000 for the year.
Calculate the amount of their deduction for interest paid on qualified residence acquisition debt and qualified home equity debt for 2013.
Qualified residence acquisition debt interest:
Qualified home equity debt interest:

Accepted Answer

The answer of Sally and Jim purchased their personal residence...

Question 5

During 2013,Hom donates a sculpture that cost $1,000 to a museum for exhibition.The sculpture's fair market value was $1,500 on the date of the donation,and Hom's adjusted gross income is $40,000.
a.If Hom had held the sculpture for 4 months and the $500 $1,500 - $1,000)of appreciation would have been a short-term capital gain,calculate the amount of his itemized deduction for the contribution.
b.If Hom had held the sculpture for 2 years and the $500 gain would have been a long-term capital gain,calculate the amount of his itemized deduction for the contribution.

Accepted Answer

The answer of During 2013,Hom donates a sculpture that cost...

Question 6

Ronald donates publicly traded Microsystems stock with a basis of $2,000 and a fair market value of
$20,000 to the local library,which is considered a public charity.Ronald has $30,000 of adjusted gross income,and he purchased the stock 15 years ago.How is this contribution treated on Ronald's tax return?

Accepted Answer

The answer of Ronald donates publicly traded Microsystems stock with...

Question 7

Which of the following is correct for Qualified Tuition Programs for 2013?

Accepted Answer

Contributions made to Qualified Tuition Programs are not deductible from federal income tax, but qualified educational expense distributions from these programs are tax-free.

Question 8

April and Wilson are married and file a joint tax return.Wilson is a police officer,and in the current tax year he spends $375 on uniforms and $150 for dry cleaning the uniforms.April is in the National Guard and military regulations restrict her from wearing her uniforms when she is off duty.The cost of uniforms for the year was $225 and the cost of dry cleaning them amounted to $75.April was granted a uniform allowance of $200 for the year.She also purchased a pair of standard black shoes to wear while on duty that cost $45.How much may they deduct on Schedule A for special clothing and uniforms,before considering the 2 percent of adjusted gross income limitation?

Accepted Answer

The answer of April and Wilson are married and file...

Question 9

Mary Lou took a $7,000 distribution from her educational savings account and used $6,500 to pay for qualified higher education expenses.The remaining balance of $500 was used to purchase clothes.On the date of the distribution,her educational savings account had a $28,000 balance including the $21,000 she had contributed.How much of the $7,000 distribution is tax-free?

Accepted Answer

The distribution is tax-free up to the amount of qualified higher education expenses, which in this case is $6,500. The remaining $500 used for clothes is not a qualified expense and is therefore subject to taxes and penalties. The portion of the distribution that is tax-free is calculated as follows: $6,500/$7,000 = 0.9286. Therefore, $7,000 x 0.9286 = $6,875 is tax-free.

Question 10

Douglas and Dena paid the following amounts of interest during 2013:
 $\begin{array}{lr}
\text { Qualified home mortgage interest } & \$ 13,000 \
\text { Other consumer interest } & \$ 5,000 \
\text { Investment interest } & \$ 10,000
\end{array}$ no investment income) 
a.Calculate the amount of their allowable deduction for investment interest for 2013.
b.Calculate the amount of Douglas and Dena's total allowable deduction for interest for 2013.

Accepted Answer

The answer of Douglas and Dena paid the following amounts...

Question 11

Charlie is a single taxpayer with income of $107,000 which includes $22,500 of interest income.Contributions to educational savings accounts are phased out between $95,000 and $110,000.What is the maximum contribution Charlie can make to an educational savings account?

Accepted Answer

Charlie's income is $107,000, which is $12,000 into the phase-out range. The phase-out range is $15,000 ($110,000 - $95,000). The maximum contribution of $2,000 is reduced proportionally by the amount over $95,000. The reduction is $2,000 * ($12,000 / $15,000) = $1,600, so the maximum contribution is $2,000 - $1,600 = $400.

Question 12

Which of the following is true with respect to an education incentive?

Accepted Answer

Contributions to Qualified Tuition Programs (529 plans) are not deductible on federal income tax returns, but earnings grow tax-free if used for qualified education expenses. There are no income limits for contributing to a 529 plan, making it accessible to married taxpayers at any income level.

Question 13

Pat has a dependent daughter and files as head of household.She has AGI of $375,000.What percentage of the $3,900 personal exemption and $3,900 dependencey exemption may she deduct on her 2013 income tax return?

Accepted Answer

Taxpayers who file as head of household with an AGI above a certain amount ($313,800 for 2013) will have their exemptions phased out. For every $2,500 of AGI over the threshold, the exemptions will be reduced by 2%. Therefore, with an AGI of $375,000, Pat's exemptions are reduced by 24% (($375,000 - $313,800)/$2,500 x 2%) which means she can only deduct 76% of the exemptions. Therefore, she can deduct 76% of $3,900 for the personal exemption and 76% of $3,900 for the dependency exemption, which equals $2,964 for each exemption. Finally, she can deduct 20% of these amounts, since that is the tax rate for her income level, which results in a deduction of $593 for each exemption. Therefore, she can deduct a total of $1,186 ($593 x 2) for the exemptions.

Question 14

Andy borrows $20,000 to invest in bonds.During 2013,his interest on the loan is $2,000.Andy's interest income from the bonds is $400 and his investment expenses are $300.
a.Calculate Andy's itemized deduction for investment interest for this year.
b.Is Andy entitled to a deduction in future years?

Accepted Answer

The answer of Andy borrows $20,000 to invest in bonds.During...

Question 15

Which of the following employees may deduct the cost of a uniform?

Accepted Answer

Only employees who are required to wear a specific uniform or distinctive outfit while on the job may deduct the cost of the uniform. The police officer in choice D is required to wear a uniform while on duty, making them eligible to deduct the cost of the uniform.

Question 16

Sam operates a manufacturing company as a sole proprietorship.During 2013,the manufacturing machinery used in the manufacturing process is totally destroyed by a fire in the building.The machinery had an adjusted basis of $18,000 and a fair market value of $12,000 on the date of the fire.The machinery was insured and Sam receives $10,000 from the insurance company.Sam does not replace the machinery.Assuming Sam has adjusted gross income of $60,000 for 2013,calculate the amount of Sam's casualty loss for 2013.

Accepted Answer

The answer of Sam operates a manufacturing company as a...

Question 17

Melvin owns his home and has a $200,000 mortgage related to his purchase of the residence.In the fall of 2013,he borrows $40,000 on credit cards for college costs for his two sons.The interest expense on the mortgage is $15,000 and the interest expense on the credit cards is $6,000.How much of the interest is deductible as an itemized deduction and why? If you were Melvin's accountant,what tax planning suggestion might you have made to him?

Accepted Answer

The answer of Melvin owns his home and has a...

Question 18

Alicia is a single taxpayer with AGI of $350,000 and itemized deductions of $100,000 which are made up of $30,000 of mortgage interest,$30,000 of state income taxes and property taxes,and $40,000 of contributions to her temple.What is the amount of itemized deductions that Alicia may deduct on her 2013 income tax return after the phase-out for high-income taxpayers?

Accepted Answer

For taxpayers with AGI over a certain amount, the total amount of itemized deductions is reduced by a certain percentage, which is known as the "Pease limitation." For 2013, the Pease limitation applies to single taxpayers with AGI over $250,000 and married taxpayers filing jointly with AGI over $300,000. For every $1 of AGI over the threshold amount, the total amount of itemized deductions is reduced by 3%, up to a maximum reduction of 80%.

In Alicia's case, her AGI is $350,000, which is $100,000 over the threshold amount. Therefore, her itemized deductions will be reduced by 3% of the amount over the threshold, which is $100,000.

$100,000 x 3% = $3,000

So Alicia's itemized deductions will be reduced by $3,000.

$100,000 - $3,000 = $97,000

Therefore, the amount of itemized deductions that Alicia may deduct on her 2013 income tax return after the phase-out for high-income taxpayers is $97,000.

Question 19

For married taxpayers filing a joint return in 2013,at what AGI level does the phase-out limit for contributions to Qualified Tuition Programs Section 529 plans)start?

Accepted Answer

There is no phase-out limit on contributions to Qualified Tuition Programs (Section 529 plans) for married taxpayers filing a joint return.

Question 20

Fran paid the following amounts of interest during 2013: Qualified home mortgage interest $\quad\$ 7,000$
Automobile loan interest $\quad\$ 500$
Qualified interest on second residence $\quad \$ 5,000$
Credit card interest $\quad\$ 300$ Calculate the amount of Fran's interest deduction for 2013.

Accepted Answer

The answer of Fran paid the following amounts of interest...

Quiz 5: Itemized Deductions and Other Incentives

Meade paid $5,000 of state income taxes in 2013.The total sales tax he paid during 2013 was $4,500,which included $3,000 for the cost of a new boat.How should Meade treat the taxes paid in his 2013 tax return?

In 2013,Jennie receives $12,000 of which $3,000 is earnings) from a Qualified Tuition Program.She uses the funds to pay for new furniture for her apartment.What amount is taxable to Jennie?

Which of the following is correct for Qualified Tuition Programs for 2013?

Charlie is a single taxpayer with income of $107,000 which includes $22,500 of interest income.Contributions to educational savings accounts are phased out between $95,000 and $110,000.What is the maximum contribution Charlie can make to an educational savings account?

Which of the following is true with respect to an education incentive?

Pat has a dependent daughter and files as head of household.She has AGI of $375,000.What percentage of the $3,900 personal exemption and $3,900 dependencey exemption may she deduct on her 2013 income tax return?

Andy borrows $20,000 to invest in bonds.During 2013,his interest on the loan is $2,000.Andy's interest income from the bonds is $400 and his investment expenses are $300. a.Calculate Andy's itemized deduction for investment interest for this year. b.Is Andy entitled to a deduction in future years?

Which of the following employees may deduct the cost of a uniform?

For married taxpayers filing a joint return in 2013,at what AGI level does the phase-out limit for contributions to Qualified Tuition Programs Section 529 plans) start?

Fran paid the following amounts of interest during 2013: Qualified home mortgage interest $\quad\$ 7,000$ Automobile loan interest $\quad\$ 500$ Qualified interest on second residence $\quad \$ 5,000$ Credit card interest $\quad\$ 300$ Calculate the amount of Fran's interest deduction for 2013.