Question 1

Madeoff donated stock (capital gain property) to a public charity. He purchased the stock 3 years ago for $100,000, and on the date of the gift, it had a fair market value of $200,000. What is his maximum charitable contribution deduction for the year related to this stock if his AGI is $500,000 (before considering the itemized deduction phase-out)?
A) $100,000.
B) $200,000.
C) $150,000.
D) $250,000.
E) None of the choices are correct.

Accepted Answer

The maximum charitable contribution deduction for capital gain property is limited to 30% of the donor's AGI. In this case, 30% of $500,000 is $150,000. Therefore, the maximum charitable contribution deduction for this stock is $150,000, even though its fair market value is $200,000. The answer is not A because $100,000 was the cost basis of the stock and not the fair market value at the time of the gift. The answer is not B because the maximum charitable contribution deduction is limited to 30% of AGI. The answer is not D because the maximum charitable contribution deduction is limited to 30% of AGI. The answer is not E because there is a correct choice, which is C.

Question 2

Which of the following is a true statement?
A) Taxpayers may only deduct interest on up to $1,500,000 of home acquisition indebtedness.
B) Taxpayers may deduct interest on up to $1,000,000 of home-equity debt.
C) The deduction for investment interest expense is not subject to limitation.
D) A taxpayer who incurs acquisition indebtedness in 2018 may only deduct interest on up to $750,000 of home acquisition indebtedness.
E) None of the choices are true.

Accepted Answer

Beginning in 2018, taxpayers who incur new home-acquisition indebtedness may only deduct interest on up to $750,000 of the debt. This is a reduction from the prior limit of $1,000,000. However, taxpayers who incurred acquisition indebtedness prior to December 15, 2017, may still deduct interest on up to $1,000,000 of the debt. The deduction for home-equity debt is also limited. As of 2018, taxpayers may only deduct interest on home-equity debt if the funds are used to buy, build, or substantially improve the taxpayer's home that secures the debt. The maximum amount of home-equity debt that qualifies for the interest deduction is $100,000. The deduction for investment interest expense is subject to limitation based on the taxpayer's net investment income.

Question 3

Andres and Lakeisha are married and file joint. Andres is 72 years old and in good health. Lakeisha is 62 years old and blind. What amount of standard deduction can Andres and Lakeisha claim in 2018? Standard deduction
A) $26,600.
B) $27,200.
C) $25,600.
D) $25,300.
E) none of the choices are correct.

Accepted Answer

The answer of Andres and Lakeisha are married and file...

Question 4

Which of the following is a true statement?
A) Fees for investment advice are not deductible.
B) Unreimbursed employee business expenses are not deductible.
C) Fees for tax preparation are not deductible.
D) Hobby expenses are not deductible.
E) All of the choices are true.

Accepted Answer

All of the statements are true according to current tax laws. Fees for investment advice used to be deductible, but they are no longer deductible as of 2018 under the Tax Cuts and Jobs Act. Unreimbursed employee business expenses used to be deductible, but they are also no longer deductible as of 2018. Fees for tax preparation used to be deductible, but they are no longer deductible for tax years 2018 through 2025. Hobby expenses are not deductible unless they are incurred in the pursuit of a business or investment activity.

Question 5

Which of the following is a true statement?
A) The deduction of cash contributions to public charities is limited to 30 percent of AGI.
B) The deduction of capital gain property to private nonoperating foundations is limited to 50 percent of AGI.
C) The deduction of capital gain property to public charities is limited to 20 percent of AGI.
D) The deduction of cash contributions to private nonoperating foundations is limited to 30 percent of AGI.
E) None of the choices are true.

Accepted Answer

The statement "The deduction of cash contributions to private nonoperating foundations is limited to 30 percent of AGI" is true according to the current tax laws. The other statements are either incorrect or incomplete. For example, the deduction of capital gain property to public charities is limited to 30 percent of AGI (not 20 percent) for most taxpayers, but may be limited further for some high-income taxpayers.

Question 6

Which of the following is a true statement?
A) A casualty loss on personal-use assets is generally not deductible.
B) A casualty loss on investment property is generally not deductible.
C) All casualty losses are deductible.
D) A casualty loss on personal-use asset is deductible for AGI.
E) All of the choices are true.

Accepted Answer

A casualty loss on personal-use assets is generally not deductible, except in certain circumstances such as losses due to a federally declared disaster.

Question 7

Larry recorded the following donations this year: $500 cash to a family in need
$2,400 to a church
$500 cash to a political campaign
To the Salvation Army household items that originally cost $1,200 but are worth $300.
What is Larry's maximum allowable charitable contribution if his AGI is $60,000?
A) $2,900.
B) $1,000.
C) $2,700.
D) $4,600.
E) None of the choices are correct.

Accepted Answer

Larry's maximum allowable charitable contribution is calculated as follows:
1. First, the donation of household items worth $300 to Salvation Army is not deductible as charitable contribution because the items were not in good condition and had decreased in value from $1,200 to $300.
2. Larry's total donations were $500 (cash to family in need) + $2,400 (to a church) + $500 (cash to political campaign) = $3,400.
3. Larry's AGI is $60,000, and the maximum allowable charitable contribution is limited to 60% of AGI, which is $36,000.
4. Larry's maximum allowable charitable contribution is the lesser of $3,400 and $36,000, which is $2,700. Therefore, the correct answer is choice C.

Question 8

Frieda is 67 years old and deaf. If Frieda files as a head of household, what amount of standard deduction can she claim in 2018? Standard deduction
A) $12,000.
B) $13,600.
C) $19,300.
D) $19,600.
E) $18,000.

Accepted Answer

Frieda is over 65, so she can claim the higher standard deduction amount for head of household filers who are over 65 or blind.

Question 9

Margaret Lindley paid $15,000 of interest on her $300,000 acquisition debt for her home (fair market value of $500,000), $4,000 of interest on her $30,000 home-equity loan, $1,000 of credit card interest, and $3,000 of margin interest for the purchase of stock. Assume that Margaret Lindley has $10,000 of interest income this year and no investment expenses. How much of the interest expense may she deduct this year?
A) $23,000.
B) $22,000.
C) $19,000.
D) $18,000.
E) None of the choices are correct.

Accepted Answer

Margaret may deduct the interest she paid on the home acquisition debt of up to $750,000 and the interest on the home-equity debt of up to $100,000 for a total of $19,000 ($15,000 + $4,000). The credit card interest and margin interest are not deductible. Therefore, her total interest deduction is $19,000.

Question 10

Which of the following is a deductible miscellaneous itemized deduction?
A) gambling losses to the extent of gambling winnings.
B) fees for investment advice.
C) employee business expenses.
D) tax preparation fees.
E) All of the choices are true.

Accepted Answer

Gambling losses are deductible to the extent of gambling winnings as a miscellaneous itemized deduction. Other options like fees for investment advice, employee business expenses, and tax preparation fees were affected by the Tax Cuts and Jobs Act of 2017, which suspended miscellaneous itemized deductions that were subject to the 2% floor until 2025.

Question 11

Simone donated a landscape painting (tangible capital gain property) to a library, a public charity. She purchased the painting five years ago for $50,000, and on the date of the gift, it had a fair market value of $200,000. What is her maximum charitable contribution deduction for the year if her AGI is $300,000 (before considering the itemized deduction phase-out)?
A) $100,000.
B) $200,000.
C) $90,000 if the library uses the painting in its charitable purpose.
D) $150,000.
E) None of the choices are correct.

Accepted Answer

If the library uses the painting in its charitable purpose, Simone can deduct the full fair market value of $200,000, but the deduction is limited to 30% of her AGI, which is $90,000.

Question 12

Opal fell on the ice and injured her hip this winter. As a result she paid $3,000 for a visit to the hospital emergency room and $750 for follow-up visits with her doctor. While she recuperated, Opal paid $500 for prescription medicine and $600 to a therapist for rehabilitation. Insurance reimbursed Opal $1,200 for these expenses. What is the amount of Opal's deductible medical expense before considering any AGI limitations?
A) $3,000.
B) $3,750.
C) $3,650.
D) $4,850.
E) All of the choices are correct.

Accepted Answer

The answer of Opal fell on the ice and injured...

Question 13

When taxpayers donate cash and capital gain property to a public charity, the AGI percentage limitation is applied in the following order:
A) a 30 percent of AGI limitation is applied to the aggregate donation.
B) a 60 percent of AGI limitation is applied to the cash donation and a 20 percent of AGI limitation is applied to the fair market value of the capital gain donation.
C) a 30 percent of AGI limitation is applied to the cash donation and a 20 percent of AGI limitation is applied to the fair market value of the capital gain donation.
D) a 60 percent of AGI limitation is applied to the cash donation and the fair market value of the capital gain donation is subject to the lesser of a 30 percent of AGI limitation or a 50 percent of AGI limitation after subtracting the cash contributions.
E) donations to public charities are not subject to AGI limitations.

Accepted Answer

When taxpayers donate cash and capital gain property to a public charity, the AGI percentage limitation is applied in the following order - firstly, a 60 percent of AGI limitation is applied to the cash donation. Then, the fair market value of the capital gain donation is subject to the lesser of a 30 percent of AGI limitation or a 50 percent of AGI limitation after subtracting the cash contributions. Therefore, option D is the correct answer.

Question 14

This year Amanda paid $749 in Federal gift taxes on a gratuitous transfer to her nephew. Amanda lives in Texas and does not pay any state or local income taxes. Which of the following is a true statement?
A) Amanda cannot deduct Federal gift taxes.
B) Amanda can deduct Federal gift taxes for AGI.
C) Amanda can deduct Federal gift taxes paid as an itemized deduction.
D) Amanda must include Federal gift taxes with other miscellaneous itemized deductions.
E) None of the choices are true.

Accepted Answer

The answer of This year Amanda paid $749 in Federal...

Question 15

Glenn is an accountant who races stock cars as a hobby. This year Glenn was paid a salary of $80,000 from his employer and won $2,000 in various races. What is the effect of the racing activities on Glenn's taxable income if Glenn has also incurred $4,200 of hobby expenses this year? Assume that Glenn itemizes his deductions but has no other miscellaneous itemized deductions.
A) Increase in taxable income of $2,000.
B) Increase in taxable income of $1,640.
C) No change in taxable income.
D) Decrease in taxable income of $560.
E) Decrease in taxable income of $2,200.

Accepted Answer

Under the Tax Cuts and Jobs Act of 2017, individuals can no longer deduct hobby expenses. Therefore, Glenn's $2,000 in winnings increases his taxable income, but he cannot deduct the $4,200 in expenses, resulting in an increase in taxable income of $2,000.

Question 16

This year Norma, a single taxpayer, paid $11,200 of real estate taxes on her personal residence and 9,500 of state income taxes. Which of the following is a true?
A) Norma can deduct $11,200 of real estate taxes as an itemized deduction.
B) Norma can deduct $9,500 of state income taxes as a for AGI deduction.
C) Norma can deduct $10,000 of taxes as an itemized deduction.
D) Even if Norma has no other itemized deductions, she should claim the standard deduction.
E) None of the choices are correct.

Accepted Answer

The Tax Cuts and Jobs Act of 2017 limits the amount of state and local taxes that a taxpayer can deduct to $10,000. Norma's total of $20,700 ($11,200 + $9,500) exceeds this limit, so she can only deduct $10,000 of taxes as an itemized deduction. She cannot deduct the excess amount as a for AGI deduction. If Norma has no other itemized deductions that exceed the standard deduction, it may be more beneficial for her to claim the standard deduction.

Question 17

Which of the following taxes will not qualify as an itemized deduction?
A) Personal property taxes assessed on the value of specific property.
B) State, local, and foreign income taxes.
C) Real estate taxes on a residence.
D) Gasoline taxes on personal travel.
E) None of the choices qualify as an itemized deduction.

Accepted Answer

Gasoline taxes on personal travel are not deductible as an itemized deduction. The other options listed (personal property taxes, state/local/foreign income taxes, and real estate taxes on a residence) are all deductible as itemized deductions.

Question 18

Which of the following costs are NOT deductible as an itemized medical expense?
A) The cost of eyeglasses.
B) Payments to a hospital.
C) Transportation for medical purposes.
D) The cost of insurance for long-term care services.
E) All of the choices are deductible as medical expenses.

Accepted Answer

All of the choices listed are deductible as medical expenses.

Question 19

Carly donated inventory (ordinary income property) to a church. She purchased the inventory last month for $100,000, and on the date of the gift, it had a fair market value of $92,000. What is her maximum charitable contribution deduction for the year related to this inventory if her AGI is $200,000?
A) $100,000.
B) $92,000.
C) $60,000.
D) $46,000 if the church sells the inventory.
E) None of the choices are correct.

Accepted Answer

The answer of Carly donated inventory (ordinary income property) to...

Question 20

Which of the following costs are deductible as an itemized medical expense?
A) The cost of prescription medicine and over-the-counter drugs.
B) Medical expenses incurred to prevent disease.
C) The cost of elective cosmetic surgery.
D) Medical expenses reimbursed by health insurance.
E) None of the costs are deductible.

Accepted Answer

Medical expenses incurred to prevent disease are deductible as an itemized medical expense. Prescription medicines are deductible, but over-the-counter drugs are not. Elective cosmetic surgery and reimbursed expenses are not deductible.

Quiz 17: Individual From Agi Deductions

Which of the following is a true statement?

Andres and Lakeisha are married and file joint. Andres is 72 years old and in good health. Lakeisha is 62 years old and blind. What amount of standard deduction can Andres and Lakeisha claim in 2018? Standard deduction

Which of the following is a true statement?

Which of the following is a true statement?

Which of the following is a true statement?

Larry recorded the following donations this year: $500 cash to a family in need $2,400 to a church $500 cash to a political campaign To the Salvation Army household items that originally cost $1,200 but are worth $300. What is Larry's maximum allowable charitable contribution if his AGI is $60,000?

Frieda is 67 years old and deaf. If Frieda files as a head of household, what amount of standard deduction can she claim in 2018? Standard deduction

Which of the following is a deductible miscellaneous itemized deduction?

When taxpayers donate cash and capital gain property to a public charity, the AGI percentage limitation is applied in the following order:

This year Amanda paid $749 in Federal gift taxes on a gratuitous transfer to her nephew. Amanda lives in Texas and does not pay any state or local income taxes. Which of the following is a true statement?

This year Norma, a single taxpayer, paid $11,200 of real estate taxes on her personal residence and 9,500 of state income taxes. Which of the following is a true?

Which of the following taxes will not qualify as an itemized deduction?

Which of the following costs are NOT deductible as an itemized medical expense?

Which of the following costs are deductible as an itemized medical expense?