Question 1

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

Accepted Answer

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

Question 2

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.

Accepted Answer

The answer of A taxpayer pays points to obtain financing...

Question 3

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.

Accepted Answer

Federal income taxes are not deductible as itemized deductions; however, state income taxes, property taxes on a personal residence, mortgage interest, and charitable contributions are deductible.

Question 4

Interest paid or accrued during 2019 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.

Accepted Answer

The answer of Interest paid or accrued during 2019 on...

Question 5

In January 2020, Pam, a calendar year cash basis taxpayer, made an estimated state income tax payment for 2019. The payment is deductible in 2019.

Accepted Answer

Estimated state income tax payments are only deductible in the year in which they are paid. Therefore, Pam cannot deduct the payment on her 2019 tax return because it was made in 2020.

Question 6

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.

Accepted Answer

FICA (employer's share) on household employee wages is not deductible as an itemized deduction.

Question 7

Tom, whose MAGI is $40,000, paid $3,500 of interest on a qualified student loan in 2019.He is single and may deduct the $3,500 interest as an itemized deduction.

Accepted Answer

The deduction for student loan interest is an adjustment to income, not an itemized deduction, and it can be claimed regardless of whether the taxpayer itemizes deductions or takes the standard deduction.

Question 8

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

Accepted Answer

The entire amount contributed to a qualifying Health Savings Account is generally deductible for AGI on the taxpayer's federal income tax return. Therefore, the $2,000 contribution made by Georgia would qualify as an expense deductible for AGI.

Question 9

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

Accepted Answer

A qualified residence includes both the taxpayer's principal residence and one other residence selected by the taxpayer that is used for personal purposes for a certain amount of time during the year.

Question 10

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.

Accepted Answer

Real property taxes on the store building are deductible as a business expense, while state income taxes related to the net income of the furniture store are not deductible for sole proprietors.

Question 11

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.

Accepted Answer

State income tax paid on business net income is a personal expense and can be claimed as an itemized deduction on Grace's individual income tax return, not as a business expense on the business's tax return.

Question 12

Phyllis, who is single, has itemized deductions totaling $20,000.She overpaid her 2018 state income tax and is entitled to a refund of $400 in 2019.Phyllis chooses to apply the $400 overpayment toward her state income taxes for 2019.She is required to recognize that amount as income in 2019.

Accepted Answer

The answer of Phyllis, who is single, has itemized deductions...

Question 13

Trent sells his personal residence to Chester on July 1, 2019.He had paid $7,000 in real property taxes on March 1, 2019, the due date for property taxes for 2019.Trent may not deduct the portion of the taxes he paid for the period the property was owned by Chester.

Accepted Answer

Trent cannot deduct the portion of the taxes he paid for the period when the property was owned by Chester because he did not own the property during that time.

Question 14

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.

Accepted Answer

According to the IRS, the cost of new curbing for a personal residence is considered a non-deductible expense, even if it is required by the city and provides incidental benefits to the public welfare.

Question 15

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.

Accepted Answer

A qualified residence for the purpose of computing the deduction for qualified residence interest includes the taxpayer's principal residence and only one other residence of the taxpayer or spouse, not two.

Question 16

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

Accepted Answer

According to IRS Publication 502, "If you provide more than half of the support of a person who is your dependent, you may be able to include any medical expenses you pay for that person." Since Marie is considered a dependent of Bill, he can include the $2,500 of medical expenses he paid for her when calculating his medical expense deduction, even though she is married and files a joint return with her husband.

Question 17

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.

Accepted Answer

According to IRS guidelines, costs for local benefits that increase the value of the property such as sidewalks or curbs cannot be deducted as taxes. However, they can be added to the basis of the property which can help in reducing taxes owed when the property is sold.

Question 18

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.

Accepted Answer

The statement is true. Fees for automobile inspections, titles and registration, tolls, parking meter deposits, and postage are not deductible if they are incurred for personal reasons. However, if these expenses are incurred as a business expense by a self-employed taxpayer, they are deductible as deductions for AGI.

Question 19

Matt, a calendar year taxpayer, pays $11,000 in medical expenses in 2019.He expects $5,000 of these expenses to be reimbursed by an insurance company in 2020.In determining his medical expense deduction for 2019, Matt must reduce his 2019 medical expenses by the amount of the reimbursement he expects in 2020.

Accepted Answer

In determining his medical expense deduction for 2019, Matt should not reduce his 2019 medical expenses by the amount of the reimbursement he expects in 2020. He should only reduce his expenses by the reimbursements actually received in 2019.

Question 20

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.

Accepted Answer

A taxpayer who claimed the standard deduction in the year the medical expenses were incurred (in this case, 2018) can exclude insurance reimbursements from gross income in the year of reimbursement (in this case, 2019). This is because the taxpayer did not itemize deductions and reduce their taxable income by the medical expenses in the year they were incurred.

Quiz 10: Individuals: Income, Deductions, and Credits