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Exam 10: Deductions and Losses: Certain Itemized Deductions

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Question 21

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Joe,who is in the 33% tax bracket in 2011,expects to retire in 2012 and be in the 25% tax bracket.He plans to donate $50,000 to his church.Because he will not have the cash available until 2012,Joe donates land (long-term capital gain property)with a basis of $10,000 and fair market value of $50,000 to the church in December 2011.He reacquires the land for $50,000 in February 2012.Discuss Joe's tax objectives and all tax issues related to his actions.

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Joe is attempting to accelerate his char...

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Question 22

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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:

A) $43,350.
B) $56,250.
C) $59,250.
D) $60,375.
E) None of the above.

F) B) and E)
G) A) and B)

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Question 23

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Interest paid or accrued during the tax year on aggregate acquisition indebtedness of $2 million or less ($1 million or less for married persons filing separate returns)is deductible as qualified residence interest.

Letha incurred a $1,600 prepayment penalty to a lending institution because she paid off the mortgage on her home early.The $1,600 is deductible as interest expense.

Sid and Andrea Peterson are married and together have AGI of $120,000 in 2011.They have two dependents and file a joint return.During the year,they paid $6,000 for medical insurance,$12,000 in doctor bills and hospital expenses,and $800 for prescribed medicine and drugs.

Joe,a cash basis taxpayer,took out a 12-month business loan on December 1,2011.He prepaid all $3,600 of the interest on the loan on December 1,2011.Joe can deduct all $3,600 of the prepaid interest in 2011.

Betty,who is an accounting firm partner,paid $4,800 for medical insurance coverage for herself.She can include the $4,800 when calculating her itemized medical expense deduction.

Brian,a self-employed individual,pays state income tax payments of: $900 on January 18,2011 (4th estimated tax payment for 2010) $1,000 on April 15,2011 (1st estimated tax payment in 2011) $1,000 on June 15,2011 (2nd estimated tax payment in 2011) $1,000 on September 15,2011 (3rd estimated tax payment in 2011) $800 on January 17,2012 (4th estimated tax payment of 2011) Brian had a tax overpayment of $500 on his 2010 state income tax return and applied this to his 2011 state income taxes.What is the amount of Brian's state income tax itemized deduction for his 2011 Federal income tax return?

Dwayne contributed stock worth $17,000 to a qualified charity.He acquired the stock fourteen months ago for $8,000.He may deduct $17,000 as a charitable contribution deduction (subject to percentage limitations).

Carol pays the medical expenses of her son,Chad.Chad would qualify as Carol's dependent except that he earns $7,500 during the year.Carol may not claim Chad's medical expenses because he is not a dependent.

Donald owns a principal residence in Chicago,a vacation lodge in New Mexico,and a yacht (with living quarters)on Lake Michigan.All three properties have mortgages on which Donald pays interest.Discuss any limitations that apply to Donald's mortgage interest deduction,and suggest any strategy Donald should consider to maximize his deduction.

Virginia had AGI of $100,000 in 2011.She donated Amber Corporation stock with a basis of $9,000 to a qualified charitable organization on July 5,2011.

Helen pays nursing home expenses of $3,000 per month for her mother.The monthly charge covers the following items: $1,400 for medical care,$900 for lodging,and $700 for food.Under what circumstances can Helen include the $3,000 per month payment when computing her medical expense deduction for the year? If Helen is not allowed to include the entire payment,how much can she include?

Albert is the sole proprietor of a grocery store.He cannot deduct real property taxes on his store building and state income taxes related to his net income from the grocery store as a business deduction.

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?

Tina,whose MAGI is $50,000,paid $3,000 of interest on a qualified education loan in 2011.Tina is single.She may deduct the $3,000 interest as a deduction for AGI.

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?

Which of the following items would be an itemized deduction on Schedule A of Form 1040 subject to the 2%-of-AGI floor?

Phyllis,a calendar year cash basis taxpayer who itemized deductions,overpaid her 2010 state income tax and is entitled to a refund of $400.Phyllis chooses to apply the $400 overpayment toward her state income taxes for 2011.She is required to recognize that amount as income in 2011.

In 2011,Dena traveled 545 miles for specialized medical treatment that was not available in her hometown.She paid $80 for meals during the trip,$125 for a hotel room on Tuesday night,and $15 in parking fees.She did not keep records of other out-of-pocket costs for transportation.Dena can include $235 in computing her medical expenses.