Question 1

During 2011,Ellen paid the following taxes:  Ellen sold her personal residence on May 30,2011,under an agreement in which the real estate taxes were not prorated between the buyer and the seller.What amount qualifies as a deduction from AGI for 2011 for Ellen?

Accepted Answer

The answer of During 2011,Ellen paid the following taxes: ...

Question 2

David,a single taxpayer,took out a mortgage on his home for $300,000 nine years ago.In August of this year,when the home had a fair market value of $550,000 and he owed $225,000 on the mortgage,he took out a home equity loan for $350,000.David used the funds to purchase a yacht to be used for recreational purposes.What is the maximum amount of debt on which he can deduct home equity interest?

Accepted Answer

According to the Tax Cuts and Jobs Act of 2017, taxpayers can only deduct interest on home equity debt up to $100,000. Since David took out a home equity loan for $350,000, he can only deduct interest on the first $100,000 of the loan.

Question 3

Your friend Scotty informs you that he received a "tax-free" reimbursement in 2011 of some medical expenses he paid in 2010.Which of the following statements best explains why Scotty is not required to report the reimbursement in gross income?

Accepted Answer

If Scotty did not itemize deductions in 2010, he does not need to report the reimbursement in gross income. If he had itemized deductions, he would have deducted the medical expenses on his tax return, and the reimbursement would need to be reported as income to prevent a double tax benefit. However, if he did not itemize, he did not receive any tax benefit from the deduction, so the reimbursement does not need to be reported as income. The fact that Scotty itemized deductions in 2011 is irrelevant to this situation.

Question 4

Tom is advised by his family physician that he needs back surgery to correct a problem from his last back surgery.Since Tom is in a wheel chair,he needs his wife,Jean,to accompany him on his trip to Rochester,Minnesota,for in-patient treatment at the Mayo Clinic,which specializes in this type of surgery.Tom incurred the following costs:  Compute Tom's medical expenses for the trip (subject to the 7.5% floor).

Accepted Answer

The answer of Tom is advised by his family physician...

Question 5

Joseph and Sandra,married taxpayers,took out a mortgage on their home for $350,000 in 1989.In May of this year,when the home had a fair market value of $450,000 and they owed $250,000 on the mortgage,they took out a home equity loan for $220,000.They used the funds to purchase a single engine airplane to be used for recreational travel purposes.What is the maximum amount of debt on which they can deduct home equity interest?

Accepted Answer

Under the Tax Cuts and Jobs Act of 2017, taxpayers can only deduct interest on up to $100,000 of home equity debt. In this case, Joseph and Sandra took out a home equity loan for $220,000, but they can only deduct interest on up to $100,000 of that loan. Therefore, the maximum amount of debt on which they can deduct home equity interest is $100,000.

Question 6

In 2011,Terry pays $10,000 to become a charter member of Eastern University's Athletic Council.The membership ensures that Terry will receive choice seating at all of Eastern's home basketball games.Also in 2011,Terry pays $1,200 (the regular retail price)for season tickets for himself and his wife.For these items,how much qualifies as a charitable contribution?

Accepted Answer

The answer of In 2011,Terry pays $10,000 to become a...

Question 7

Dirk,who uses the cash method of accounting,lives in a state that imposes an income tax (including withholding from wages).On April 14,2011,he files his state return for 2010,paying an additional $800 in state income taxes.During 2011,his withholdings for state income tax purposes amount to $4,550.On April 13,2012,he files his state return for 2011,claiming a refund of $900.Dirk receives the refund on August 3,2012.If he itemizes deductions,how much may Dirk claim as a deduction for state income taxes on his Federal income tax return for calendar year 2011 (filed in April 2012)?

Accepted Answer

Dirk can deduct the state income taxes paid in 2011, which include the $800 paid in April 2011 for the 2010 tax year and the $4,550 withheld during 2011, totaling $5,350.

Question 8

In Shelby County,the real property tax year is the calendar year.The real property tax becomes a personal liability of the owner of real property on January 1 in the current real property tax year,2011.The tax is payable on June 1,2011.On April 30,2011,Julio sells his house to Anita for $230,000.On June 1,2011,Anita pays the entire real estate tax of $7,300 for the year ending December 31,2011.How much of the property taxes may Julio deduct?

Accepted Answer

Julio is liable for the property taxes from January 1 to April 30, 2011, which is 120 days. The total number of days in the tax year is 365. Therefore, Julio's portion of the property taxes is 120/365 * $7,300 = $2,400.

Question 9

Zeke made the following donations to qualified charitable organizations during 2011:  The used clothing was donated to the Salvation Army; the other items of property were donated to Eastern State University.Both are qualified charitable organizations.Disregarding percentage limitations,Zeke's charitable contribution deduction for 2011 is:

Accepted Answer

The answer of Zeke made the following donations to qualified...

Question 10

Pedro's child attends a school operated by the church the family attends.Pedro made a donation of $1,000 to the church in lieu of the normal registration fee of $200.In addition,Pedro paid the regular tuition of $6,000 to the school.Based on this information,what is Pedro's charitable contribution?

Accepted Answer

Pedro's charitable contribution is $800, which is the amount of the donation ($1,000) minus the normal registration fee ($200) that the donation was intended to cover. The tuition payment is not considered a charitable contribution.

Question 11

Jennifer,a calendar year taxpayer,made the following donations to qualified charitable organizations in 2011:  The land had been held as an investment and was acquired 3 years ago.Shortly after receipt,the City of Columbus sold the land for $240,000.Jennifer's AGI is $400,000.The allowable charitable contribution deduction is:

Accepted Answer

Jennifer's contribution of the appreciated property is limited to 30% of her AGI, since it is considered a capital asset held for more than a year.

Her charitable contribution deduction is calculated as follows:

Fair market value of the land: $200,000

30% of Jennifer's AGI: ($400,000 x 30%) = $120,000

Allowable deduction: Lesser of fair market value or 30% of AGI

Therefore, Jennifer's allowable deduction is $160,000 (the lesser of $200,000 and $120,000).

The reduced deduction election does not apply since Jennifer did not contribute more than 20% of her AGI.

Question 12

In 2011,Boris pays a $3,800 premium for high-deductible medical insurance for himself and his family.In addition,he contributes $3,400 to a Health Savings Account.Which of the following statements is true?

Accepted Answer

If Boris is self-employed, he may deduct $7,200 as a deduction for AGI because both the premium and the HSA contribution are deductible for self-employed individuals.

Question 13

Ron and Tom are equal owners in Robin Corporation.On July 1,2011,each loans the corporation $20,000 at annual interest of 10%.Ron and Tom are brothers.Both shareholders are on the cash method of accounting,while Robin Corporation is on the accrual method.All parties use the calendar year for tax purposes.On June 30,2012,Robin repays the loans of $40,000 together with the specified interest of $4,000.How much of the interest can Robin Corporation deduct in 2011?

Accepted Answer

The interest is not deductible because the parties are related.

Question 14

In 2011,Roseann makes the following donations to qualified charitable organizations:  The ABC stock and the inventory were given to Roseann's church,and the comic book collection was given to the United Way.Both donees promptly sold the property for the stated fair market value.Disregarding percentage limitations,Roseann's charitable contribution deduction for 2011 is:

Accepted Answer

The answer of In 2011,Roseann makes the following donations to...

Question 15

Rosie owned stock in Acme Corporation that she donated to a university (a qualified charitable organization)on September 6,2011.What is the amount of Rosie's charitable contribution deduction assuming that she had purchased the stock for $20,100 on October 22,2010,and the stock had a value of $28,200 when she made the donation?

Accepted Answer

The answer of Rosie owned stock in Acme Corporation that...

Question 16

Andrea,who lives in Ohio,volunteered to travel to Arizona in February to work on a home-building project for Habitat for Humanity (a qualified charitable organization).She was in Arizona for three weeks.She normally makes $600 per week as a carpenter's assistant and plans to deduct $1,800 as a charitable contribution.In addition,she incurred the following costs in connection with the trip: $700 for transportation,$820 for lodging,and $340 for meals.What is Andrea's deduction associated with this charitable activity?

Accepted Answer

Andrea's total expenses associated with the trip are $700 (transportation) + $820 (lodging) + $340 (meals) = $1,860. Since she plans to deduct $1,800 as a charitable contribution, her deduction associated with this charitable activity is $1,800 + $60 (the excess of expenses over the contribution) = $1,860. Therefore, the answer is choice D ( $1,860).

Question 17

During the current year,Vijay,a self-employed individual,paid the following amounts:  What is the maximum amount Vijay can claim as taxes in itemizing deductions from AGI?

Accepted Answer

The answer of During the current year,Vijay,a self-employed individual,paid the...

Question 18

Wayne developed heart problems and was unable to climb the stairs to reach his second-floor bedroom.His physician advised him to add a first-floor bedroom to his home.The cost of constructing the room was $42,000.The increase in the value of the residence as a result of the room addition was determined to be $18,000.In addition,Wayne paid the contractor $7,500 to construct an entrance ramp to his home and $10,500 to widen the hallways to accommodate his wheelchair.Wayne's AGI for the year was $120,000.How much of these expenditures can Wayne deduct as a medical expense?

Accepted Answer

The total cost of the medical expenses related to the home modifications is:

$42,000 (room addition) + $7,500 (entrance ramp) + $10,500 (widening hallways) = $60,000

Since Wayne's AGI is $120,000, he can only deduct medical expenses if they exceed 10% of his AGI.

10% of $120,000 = $12,000

Therefore, Wayne can only deduct medical expenses that exceed $12,000.

$60,000 - $18,000 (increase in home value) = $42,000

Since the room addition was for medical purposes, Wayne can deduct the full cost of $42,000 as a medical expense.

Total amount deductible = $42,000

So, the correct answer is (C) $33,000.

Question 19

Diego,who is single and lives alone,is physically handicapped as a result of a diving accident.In order to live independently,he modifies his personal residence at a cost of $20,000.The modifications included widening halls and doorways for a wheelchair,installing support bars in the bathroom and kitchen,installing a stairway lift,and rewiring so he could reach electrical outlets and appliances.Diego pays $200 for an appraisal that places the value of the residence at $124,000 before the improvements and $129,000 after.As a result of the operation of the stairway lift,Diego experienced an increase of $475 in his utility bills for the current year.Disregarding percentage limitations,how much of the above expenditures qualify as medical expense deductions?

Accepted Answer

The cost of modifications to Diego's personal residence qualifies as medical expense deductions because they were made for the purpose of accommodating his physical disability. The cost of the appraisal does not qualify as a medical expense deduction. The increase in utility bills resulting from the operation of the stairway lift may qualify as a medical expense deduction, but only the portion that is attributable to the lift itself, not the entire increase in the bill. Therefore, the total amount of medical expense deductions is $20,000 (cost of modifications) + $475 (portion of utility bill increase attributable to the lift) = $20,475.

Question 20

Marilyn,Ed's daughter who would otherwise qualify as his dependent,filed a joint return with her husband Henry.Ed,who had AGI of $150,000,incurred the following expenses:  Ed has a medical expense deduction of:

Accepted Answer

Ed's medical expenses exceed 7.5% of his AGI, which is $11,250 ($150,000 * 7.5%). Since Marilyn filed a joint return with her husband, she and her husband's expenses are combined for purposes of calculating whether they have met the threshold for deducting medical expenses. Therefore, Ed can deduct the amount by which his total medical expenses ($12,500) exceed the threshold ($11,250), which is $1,250.

Quiz 10: Deductions and Losses: Certain Itemized Deductions

During 2011,Ellen paid the following taxes: Ellen sold her personal residence on May 30,2011,under an agreement in which the real estate taxes were not prorated between the buyer and the seller.What amount qualifies as a deduction from AGI for 2011 for Ellen?

Your friend Scotty informs you that he received a "tax-free" reimbursement in 2011 of some medical expenses he paid in 2010.Which of the following statements best explains why Scotty is not required to report the reimbursement in gross income?

Pedro's child attends a school operated by the church the family attends.Pedro made a donation of $1,000 to the church in lieu of the normal registration fee of $200.In addition,Pedro paid the regular tuition of $6,000 to the school.Based on this information,what is Pedro's charitable contribution?

In 2011,Boris pays a $3,800 premium for high-deductible medical insurance for himself and his family.In addition,he contributes $3,400 to a Health Savings Account.Which of the following statements is true?

During the current year,Vijay,a self-employed individual,paid the following amounts: What is the maximum amount Vijay can claim as taxes in itemizing deductions from AGI?

Marilyn,Ed's daughter who would otherwise qualify as his dependent,filed a joint return with her husband Henry.Ed,who had AGI of $150,000,incurred the following expenses: Ed has a medical expense deduction of: