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Exam 17: Individual From Agi Deductions

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Question 21

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Ned is a head of household with a dependent son, Todd, who is a full-time student. This year Ned made the following expenditures related to Todd's support: $\begin{array}{l}\begin{array}{lll}\text { Auto insurance premiums}\\\text { Room and board at Todd's school}\\\text { Health insurance premiums}\\\text { Travel (to and from school) }\\\end{array}\begin{array}{lll}1,700 \\2,200 \\600 \\350\end{array}\end{array}$ What amount can Ned include in his itemized deductions?

A) $1,700 included in Ned's miscellaneous itemized deductions.
B) $2,050 included in Ned's miscellaneous itemized deductions.
C) $950 included in Ned's miscellaneous itemized deductions.
D) $600 included in Ned's medical expenses.
E) None of the choices are correct.

F) All of the above
G) A) and E)

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Question 22

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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.

F) C) and D)
G) A) and C)

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Question 23

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Taxpayers generally deduct the lesser of their standard deduction or their itemized deductions.

Claire donated 200 publicly-traded shares of stock (held for 5 years) to her father's nonoperating private foundation this year. The stock was worth $15,000 but Claire's basis was only $4,000. Determine the maximum amount of charitable deduction for the donation if Claire's AGI is $60,000 this year.

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?

Campbell, a single taxpayer, has $400,000 of profits from her general store that she operates as a sole proprietorship. She has no employees, $40,000 of qualified property, and $500,000 of taxable income before the deduction for qualified business income. How much is Campbell's deduction for qualified business income?

Bunching itemized deductions is one form of tax evasion.

Rachel is an accountant who practices as a sole proprietor. This year, Rachel had net business income of $270,000 from her practice. Assume that Rachel pays $50,000 wages to her employees, she has $20,000 of property (unadjusted basis of equipment she purchased last year), has no capital gains, and her taxable income before the deduction for qualified business income is $225,000. Calculate Rachel's deduction for qualified business income.

The deduction for investment interest in excess of net investment income carries forward to the subsequent year.

The deduction to individual taxpayers for charitable contributions paid in cash made to public charities is limited to ten percent of the taxpayer's AGI.

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?

Rachel is an engineer who practices as a sole proprietor. This year, Rachel had net business income of $400,000 from her business. Assume that Rachel pays $150,000 wages to her employees, she has $20,000 of property (unadjusted basis of equipment he purchased last year), has no capital gains, and her taxable income before the deduction for qualified business income is $380,000. Calculate Rachel's deduction for qualified business income.

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

Deductible medical expenses include payments to medical care providers such as doctors, dentists, and nurses and medical care facilities such as hospitals.

This year, Benjamin Hassell paid $20,000 of interest on a mortgage on his home (Benjamin borrowed $600,000 in 2015 to buy the residence and it is currently worth $1,000,000), $6,000 on a $75,000 home equity loan on his home (proceeds used to buy a car and pay off consumer debt), and $10,000 of interest on a mortgage on his vacation home (loan of $300,000; home purchased for $400,000 in 2016). How much interest expense can Benjamin deduct as an itemized deduction?

Karin and Chad (ages 30 and 31, respectively) are married and together have $110,000 of AGI. This year they have recorded the following expenses: $\begin{array}{lr}\text { Home mortgage interest } & \$ 16,640 \\\text { Real estate taxes } & 5,400 \\\text { State income taxes paid } & 6,300 \\\text { Medical expenses (unreimbursed) } & 1,800 \\\text { Employee business expenses (unreimbursed) } & 450 \\\text { Charitable contributions (cash to their church) } & 760\end{array}$ Karin and Chad will file married joint with two personal exemptions. Calculate their taxable income.

Bryan is 67 years old and lives alone. This year he has received $25,000 in taxable interest and pension payments, and he has paid the following expenses: Use Standard deduction. $\begin{array}{l}\begin{array}{lll} \text {Real estate taxes}\\ \text {Medical expenses (\$2,000 was reimbursed by insurance) }\\ \text {Charitable contributions (cash to the Unity church)}\\\end{array}\begin{array}{lll}\$ 1,640 \\3,650 \\460\end{array}\end{array}$ If Bryan files single, calculate his taxable income.

This year Kelly bought a new auto for $20,000 plus $1,650 in state and local sales taxes. Besides this sales tax, Kelly also paid $8,260 in state income taxes and had mortgage interest of $5,500 ($400,000 acquisition indebtedness on her residence). If Kelly files single with AGI of $56,000, what amount of itemized deductions will she be eligible to claim?

Which of the following is a deductible miscellaneous itemized deduction?

Erika (age 62) was hospitalized with injuries from an auto accident this year. She incurred the following expenses from the accident: $\begin{array}{l}\begin{array}{lll} \text {Hospital charges}\\ \text {Prescription medicine}\\ \text {Doctor's fees}\\\end{array}\begin{array}{lll}\$ 3,280\\510\\1240\end{array}\end{array}$ In addition, Erika's auto was completely destroyed in the accident. She bought the car several years ago for $18,000 and it was worth $4,700 at the time of the accident. What are Erika's itemized deductions this year if she was uninsured and her AGI is $40,000?