For each of the following situations, determine whether the item is deductible, how it would be deducted on the taxpayer's return (if there are alternatives possible, discuss the conditions that would determine the treatment) and any limitations, which might be placed on the deduction.
a.Allison is self-employed. She pays the following taxes during the current year:$$\begin{array} { l r }
\text { State income tax } & \$ 1,200 \
\text { Federal income tax } & 4,000 \
\text { Self-employment tax } & 3,200 \
\text { Property tax on residence } & 700 \
\text { Tax on business equipment } & 200
\end{array}$$
b.A customer who owed Leon $5,000 declared bankruptcy last year. At that time, the customer's accountant estimated that only 40% of the customer's debts would be paid. In the current year, Leon receives $1,000 from the bankruptcy court as final payment on the $5,000 debt.

Question

For each of the following situations, determine whether the item is deductible, how it would be deducted on the taxpayer's return (if there are alternatives possible, discuss the conditions that would determine the treatment) and any limitations, which might be placed on the deduction.
a.Allison is self-employed. She pays the following taxes during the current year:$$\begin{array} { l r } 
\text { State income tax } & \$ 1,200 \
\text { Federal income tax } & 4,000 \
\text { Self-employment tax } & 3,200 \
\text { Property tax on residence } & 700 \
\text { Tax on business equipment } & 200
\end{array}$$ 
b.A customer who owed Leon $5,000 declared bankruptcy last year. At that time, the customer's accountant estimated that only 40% of the customer's debts would be paid. In the current year, Leon receives $1,000 from the bankruptcy court as final payment on the $5,000 debt.

Quizplus · Accepted Answer

The Answer of For each of the following situations, determine whether the item is deductible, how it would be deducted on the taxpayer's return (if there are alternatives possible, discuss the conditions that would determine the treatment) and any limitations, which might be placed on the deduction.
a.Allison is self-employed. She pays the following taxes during the current year:$$\begin{array} { l r } 
\text { State income tax } & \$ 1,200 \
\text { Federal income tax } & 4,000 \
\text { Self-employment tax } & 3,200 \
\text { Property tax on residence } & 700 \
\text { Tax on business equipment } & 200
\end{array}$$ 
b.A customer who owed Leon $5,000 declared bankruptcy last year. At that time, the customer's accountant estimated that only 40% of the customer's debts would be paid. In the current year, Leon receives $1,000 from the bankruptcy court as final payment on the $5,000 debt.

For Each of the Following Situations, Determine Whether the Item