Question 1

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.
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Calculate the amount of their deduction for interest paid on qualified residence acquisition debt and qualified home equity debt for 2014.
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Qualified residence acquisition debt interest:
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Qualified home equity debt interest:

Accepted Answer

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

Question 2

Newt is a single taxpayer living in Hollywood, California, with adjusted gross income for the 2014 tax year of $43,050. Newt's employer withheld $3,700 in state income tax from his salary. In April of 2014, he paid $300 in additional state taxes for his prior year's return. The real estate taxes on his home are $1,800 for 2014 and his personal property tax based on the value of his automobile is $75. Also, he paid $210 for state gasoline taxes for the year.
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Assuming he elects to deduct state and local income taxes, how much should Newt deduct on Schedule A of Form 1040 of his 2014 tax return for taxes paid?

Accepted Answer

The answer of Newt is a single taxpayer living in...

Question 3

Sherry had $5,600 withheld from her wages for state income taxes during 2014. In May of 2014, she received a $450 refund for her prior year state tax return. The amount of Sherry's tax on her 2014 tax return is $6,100 and she pays the additional tax of $500 ($6,100 - $5,600) when she files her state income tax return in April of 2015.
a.​Assuming she elects to deduct the state income tax, how much state income taxes should Sherry deduct on Schedule A of Form 1040 of her 2014 federal income tax return?
b.How should Sherry report the $450 refund?

Accepted Answer

The answer of Sherry had $5,600 withheld from her wages...

Question 4

Charlie is a single taxpayer with income of $106,000 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

The answer of Charlie is a single taxpayer with income...

Question 5

Fran paid the following amounts of interest during 2014:
Calculate the amount of Fran's interest deduction for 2014.

Accepted Answer

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

Question 6

Douglas and Dena paid the following amounts of interest during 2014:
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a.Calculate the amount of their allowable deduction for investment interest for 2014.
b.Calculate the amount of Douglas and Dena's total allowable deduction for interest for 2014.

Accepted Answer

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

Question 7

Meade paid $5,000 of state income taxes in 2014. The total sales tax he paid during 2014 was $4,500, which included $3,000 for the cost of a new boat. How should Meade treat the taxes paid in his 2014 tax return?

Accepted Answer

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

Question 8

Which of the following is correct for Qualified Tuition Programs for 2014?

Accepted Answer

Contributions to Qualified Tuition Programs (QTPs), also known as 529 plans, are not deductible on federal taxes, but the distributions used for qualified educational expenses are tax-free.

Question 9

In 2014, 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

Qualified Tuition Programs, also known as 529 plans, allow for tax-free withdrawals if the funds are used for qualified education expenses, such as tuition, fees, books, and room and board. However, using the funds for non-qualified expenses, such as new furniture, will result in the earnings portion of the withdrawal being subject to income tax and a 10% penalty. In this case, only the $3,000 earnings portion is taxable to Jennie, so the correct answer is C.

Question 10

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

Accepted Answer

Only employees who are required to wear a uniform while on duty may deduct the cost of the uniform. This includes police officers, firefighters, military personnel, and other occupations that require a specific uniform for safety or identification purposes. All other employees, such as stock brokers, construction workers, washer repair women, and delivery persons, cannot deduct the cost of their work clothes because they can be worn outside of work and are not considered a required uniform.

Question 11

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 2014 income tax return after the phase-out for high-income taxpayers?

Accepted Answer

The itemized deduction phase-out for high-income taxpayers in 2014 begins at $305,050 for single taxpayers. Alicia's AGI is $350,000, which exceeds this threshold by $44,950. This excess is divided by $2,500 and rounded up to the nearest whole number to determine the reduction to her itemized deductions. In this case, the reduction is $18, which means that Alicia's itemized deductions are reduced to $99,982. Since her total itemized deductions are less than her standard deduction of $100,000, she should take the standard deduction instead. Therefore, the amount of itemized deductions that Alicia may deduct on her 2014 income tax return after the phase-out for high-income taxpayers is $97,126 ($100,000 - $2,874). The answer is B.

Question 12

Jake developed serious health problems and had his bathroom remodeled so it is wheelchair-accessible and had a handicapped shower installed, based on a written prescription by his doctor. The cost of the remodel is $15,000 and is deemed to add no value to his house by a real estate appraiser. How is the cost of the remodel treated on Jake's tax return?

Accepted Answer

The answer of Jake developed serious health problems and had...

Question 13

Pat has a dependent daughter and files as head of household. She has AGI of $375,000. What percentage of the $3,950 personal exemption and $3,950 dependency exemption may she deduct on her 2014 income tax return?

Accepted Answer

The answer of Pat has a dependent daughter and files...

Question 14

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 15

For 2014, Betsy and Bob, ages 62 and 68, respectively, are married taxpayers who file a joint tax return with AGI of $48,000. During the year they incurred the following expenses:
In addition, their insurance company reimbursed them $3,000 for the above expenses.
Using the format below, calculate Betsy and Bob's deduction for medical and dental expenses for 2014.

Accepted Answer

The answer of For 2014, Betsy and Bob, ages 62...

Question 16

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 17

During 2014, Sarah, age 29, had adjusted gross income of $13,000 and paid the following amounts for medical expenses:
In 2014, Sarah drove 106 miles for medical transportation in her personal automobile, and she uses the standard mileage allowance. Her insurance company reimbursed Sarah $300 during the year for the above medical expenses. Using the schedule below, calculate the amount of Sarah's deduction for medical and dental expenses for the 2014 tax year.

Accepted Answer

The answer of During 2014, Sarah, age 29, had adjusted...

Question 18

Mary Lou took an $8,000 distribution from her educational savings account and used $6,500 to pay for qualified higher education expenses. The remaining balance of $1,500 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 $8,000 distribution is tax-free?

Accepted Answer

The distribution is tax-free to the extent that it does not exceed the amount contributed to the account. Mary Lou contributed $21,000 to the account, so the tax-free portion of the distribution is $21,000. Since the distribution was only $8,000, the entire distribution is tax-free.

Question 19

For married taxpayers filing a joint return in 2014, 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 or any other filing status.

Question 20

Daniel lives in a state that charges a vehicle registration fee of $50 plus $20 for every $1,000 of value. During 2014, Daniel paid $170 for registration of his automobile.
a.​How much of the vehicle registration fee is deductible as a personal property tax on Schedule A of Daniel's Form 1040?
b.Explain your answer.

Accepted Answer

The answer of Daniel lives in a state that charges...

Quiz 5: Itemized Deductions and Other Incentives

Charlie is a single taxpayer with income of $106,000 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?

Fran paid the following amounts of interest during 2014: Calculate the amount of Fran's interest deduction for 2014.

Douglas and Dena paid the following amounts of interest during 2014: a.Calculate the amount of their allowable deduction for investment interest for 2014. b.Calculate the amount of Douglas and Dena's total allowable deduction for interest for 2014.

Meade paid $5,000 of state income taxes in 2014. The total sales tax he paid during 2014 was $4,500, which included $3,000 for the cost of a new boat. How should Meade treat the taxes paid in his 2014 tax return?

Which of the following is correct for Qualified Tuition Programs for 2014?

In 2014, 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 employees may deduct the cost of a uniform?

Pat has a dependent daughter and files as head of household. She has AGI of $375,000. What percentage of the $3,950 personal exemption and $3,950 dependency exemption may she deduct on her 2014 income tax return?

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

For married taxpayers filing a joint return in 2014, at what AGI level does the phase-out limit for contributions to Qualified Tuition Programs (Section 529 plans) start?

Quiz 5: Itemized Deductions and Other Incentives

Charlie is a single taxpayer with income of $106,000 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?

Fran paid the following amounts of interest during 2014: Calculate the amount of Fran's interest deduction for 2014.

Douglas and Dena paid the following amounts of interest during 2014: ​ a.Calculate the amount of their allowable deduction for investment interest for 2014. b.Calculate the amount of Douglas and Dena's total allowable deduction for interest for 2014.

Meade paid $5,000 of state income taxes in 2014. The total sales tax he paid during 2014 was $4,500, which included $3,000 for the cost of a new boat. How should Meade treat the taxes paid in his 2014 tax return?

Which of the following is correct for Qualified Tuition Programs for 2014?

In 2014, 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 employees may deduct the cost of a uniform?

Pat has a dependent daughter and files as head of household. She has AGI of $375,000. What percentage of the $3,950 personal exemption and $3,950 dependency exemption may she deduct on her 2014 income tax return?

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

For married taxpayers filing a joint return in 2014, at what AGI level does the phase-out limit for contributions to Qualified Tuition Programs (Section 529 plans) start?

Douglas and Dena paid the following amounts of interest during 2014: a.Calculate the amount of their allowable deduction for investment interest for 2014. b.Calculate the amount of Douglas and Dena's total allowable deduction for interest for 2014.