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Exam 10: Deductions and Losses: Certain Itemized Deductions

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Question 41

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Joseph and Sandra,married taxpayers,took out a mortgage on their home for $350,000 in 1990.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?

A) $50,000.
B) $100,000.
C) $220,000.
D) $230,000.
E) None of the above.

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

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Question 42

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Timothy suffers from heart problems and,upon the recommendation of a physician,has an elevator installed in his personal residence.In connection with the elevator,Timothy incurs and pays the following amounts during the current year: The system has an estimated useful life of 20 years.The appraisal was to determine the value of Timothy's residence with and without the system.The appraisal states that the system increased the value of Timothy's residence by $2,000.How much of these expenses qualify for the medical expense deduction (before application of the 7.5% limitation)in the current year?

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Only $13,500 qualifies for the installat...

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Question 43

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The phaseout of certain itemized deductions has been reinstated for years beginning in 2012.

Herbert is the sole proprietor of a furniture store.He can deduct real property taxes on his store building but he cannot deduct state income taxes related to his net income from the furniture store as a business deduction.

Linda borrowed $60,000 from her parents for a down payment on a condominium.She paid interest of $5,500 in 2010,$0 in 2011,and $9,000 in 2012.The IRS disallowed the deduction.Can you offer any explanation for the disallowance?

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

Grace's sole source of income is from a restaurant that she owns and operates as a proprietorship.Any state income tax Grace pays on the business net income must be deducted as a business expense rather than as an itemized deduction.

In applying the percentage limitations,carryovers of charitable contributions must be claimed after contributions in the current year are considered (FIFO rule).

Any capital asset donated to a public charity that would result in long-term capital gain if sold,is subject to the 30%-of-AGI ceiling limitation on charitable contributions for individuals.

Antonio sold his personal residence to Mina on July 1,2012.He had paid real property taxes on March 1,2012,the due date for property taxes for 2012.How will Antonio's payment affect his deduction for property taxes in 2012? Will Antonio's payment of the taxes have any effect on Mina's itemized deductions for 2012? What other tax or financial effects will Antonio's payment of the taxes have on either party?

Contributions to public charities in excess of 50% of AGI may be carried back 3 years or forward for up to 5 years.

Rosie owned stock in Acme Corporation that she donated to a university (a qualified charitable organization) on September 6,2012.What is the amount of Rosie's charitable contribution deduction assuming that she had purchased the stock for $20,100 on October 22,2011,and the stock had a value of $28,200 when she made the donation?

Joe,who is in the 33% tax bracket in 2012,expects to retire in 2013 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 2013,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 2012.He reacquires the land for $50,000 in February 2013.Discuss Joe's tax objectives and all tax issues related to his actions.

Harry and Sally were divorced three years ago.In July of the current year,their son,Joe,broke his arm falling out of a tree.Joe lives with Sally and Sally claims him as a dependent on her tax return.Harry paid for the medical expenses related to Joe's injury.Can Harry claim the medical expenses he paid for Joe on his tax return?

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:

Zeke made the following donations to qualified charitable organizations during 2012: 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 2012 is:

Paul,a calendar year married taxpayer,files a joint return for 2012.Information for 2012 includes the following: Paul's allowable itemized deductions for 2012 are:

During the year,Victor spent $300 on bingo games sponsored by his church.If all profits went to the church,Victor has a charitable contribution deduction of $300.

During 2012,Nancy paid the following taxes: Nancy sold her personal residence on June 30,2012,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 2012 for Nancy?

Joe,a cash basis taxpayer,took out a 12-month business loan on December 1,2012.He prepaid all $3,600 of the interest on the loan on December 1,2012.Joe can deduct all $3,600 of the prepaid interest in 2012.