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Exam 10: Deductions and Losses: Certain Itemized Deductions

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Question 1

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Freda,who has AGI of $100,000 in 2010,contributes stock in Tulip Corporation (a publicly traded corporation)to Central State University,a qualified charitable organization.The stock is worth $59,000,and Freda acquired it as an investment two years ago at a cost of $44,000.

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General discussion.The stock is appreciated capital gain property.The general rule limits the deduction for the contribution of such property to 30% of AGI.However,under the reduced deduction election,a taxpayer may choose to forgo a deduction of the appreciation on capital gain property.This enables the taxpayer to move from the 30% limitation to a 50% limitation. 11ea8d38_2940_0da2_88b5_89cc2f1e566b_TB2201_00

Question 2

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Andrew was injured in an automobile accident and is confined to a wheelchair.Because he lives alone,he must have extensive modifications made to various rooms in his home,including the kitchen,bathrooms,and hallways.Do the capital expenditures incurred to modify his home constitute a valid medical expense? If so,what portion of the expense is deductible?

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The full cost of certain home-related capital expenditures incurred to enable a physically handicapped individual to live independently and productively qualifies as a medical expense.Qualifying costs include expenditures for constructing entrance and exit ramps to the residence,widening hallways and doorways to accommodate wheelchairs,installing support bars and railings in bathrooms and other rooms,and adjusting electrical outlets and fixtures.These expenditures are subject to the 7.5% floor only,and the increase in the home's value is deemed to be zero.

Question 3

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Mel made the following donations to charity during the year: The used clothing was donated to the Salvation Army;the other items of property were donated to a Methodist Church seminary.Disregarding percentage limitations,Mel's charitable contribution deduction for the year is:

Kelley,who has AGI of $250,000,owns stock in Blue Corporation with a basis of $20,000.He donates the stock to a qualified charitable organization on July 5,2010.

José sells his personal residence to Manuel on July 1,2010.He had paid $4,000 in real property taxes on March 1,2010,the due date for property taxes for 2010.José may deduct the portion of the taxes he paid for the period the property was owned by Manuel.

Nancy had an accident while skiing on vacation.She sustained facial injuries that required cosmetic surgery.While having the surgery done to restore her appearance,she had additional surgery done to reshape her nose,which was not injured in the accident.The surgery to restore her appearance cost $12,000 and the surgery to reshape her nose cost $5,000.How much of Nancy's surgical fees will qualify as a deductible medical expense (before application of the 7.5% limitation) ?

Larry and Beth are married and together have AGI of $80,000 in 2010.They have two dependents and file a joint return.They pay $3,000 for a high deductible health insurance policy and they contribute $2,400 to a qualified Health Savings Account.During the year,they paid the following amounts for medical care: $7,500 in physician and dentist bills and hospital expenses,and $1,700 for prescribed medicine and drugs.In November 2010,they received an insurance reimbursement of $2,100 for hospitalization.They expect to receive an additional reimbursement of $1,000 in January 2011.Determine the maximum deduction allowable for medical expenses in 2010.

Diane contributed a parcel of land to the United Way.In addition,she contributed Bibles and song books from her proprietorship's book store inventory to First Church,a qualified charitable organization.Should Diane's charitable contribution deduction for these contributions be determined by the basis or fair market value of the contributed items?

On December 23,2010,Megan used her credit card to make a $750 contribution to the United Way,a qualified charitable organization.She will pay her credit card balance in January 2011.If Megan itemizes,she cannot deduct the $750 in 2010.

During the year,Eve (a resident of Billings,Montana)spends three consecutive weeks in Louisville,Kentucky.One week is spent representing the Billings First Christian Church at the national convention,and two weeks are spent vacationing with relatives.One third of Eve's travel expenses will qualify as a charitable deduction.

Tony,a cash basis taxpayer,took out a 12-month business loan on December 1,2010.He prepaid all $4,200 of the interest on the loan on December 1,2010.Tony can deduct all $4,200 of the prepaid interest in 2010.

In 2010,Barry pays a $3,000 premium for high-deductible medical insurance for himself and his family.In addition,he contributes $2,600 to a Health Savings Account.Which of the following statements is true?

Fees for automobile inspections,automobile titles and registration,bridge and highway tolls,parking meter deposits,and postage are not deductible if incurred for personal reasons,but they are deductible as deductions for AGI if incurred as a business expense by a self-employed taxpayer.

During the current year,Maria and her three dependent children had annual physical exams,which cost $750,and dental checkups for all four of them,which cost $420.In addition,Maria paid $800 for medically supervised treatments to enable her to stop smoking.After she stopped smoking,she began to gain weight and incurred $1,200 in costs for a medically supervised weight loss program.Which of these expenses qualify for the medical deduction?

During 2010,Sam,a self-employed individual,paid the following amounts: What amount can Sam claim as taxes in itemizing deductions from AGI?

In 2010,Mary traveled 800 miles for specialized medical treatment that was not available in her hometown.She paid $60 for meals during the trip,$105 for a hotel room on Tuesday night,and $20 in parking fees.She did not keep records of other out-of-pocket costs for transportation.Mary can include $202 in computing her medical expenses.

In 2010,Roseann makes the following donations to qualified charitable organizations: The ABC stock and the inventory were given to Roseann's church,and the comic book collection was given to the United Way.Both donees promptly sold the property for the stated fair market value.Disregarding percentage limitations,Roseann's charitable contribution deduction for 2010 is:

A taxpayer pays points to obtain financing to purchase a rental house.At the election of the taxpayer,the points can be deducted as interest expense for the year paid.

Pedro's child attends a school operated by the church the family attends.Pedro made a donation of $1,000 to the church in lieu of the normal registration fee of $200.In addition,Pedro paid the regular tuition of $6,000 to the school.Based on this information,what is Pedro's charitable contribution?

Wilma,who uses the cash method of accounting,lives in a state that imposes an income tax.In April 2010,she files her state income tax return for 2009 and pays an additional $1,000 in state income taxes.During 2010,her withholdings for state income tax purposes amount to $7,400,and she pays estimated state income tax of $700.In April 2011,she files her state income tax return for 2010 claiming a refund of $1,800.Wilma receives the refund in August 2011. a.Assuming Wilma itemized deductions in 2010,how much may she claim as a deduction for state income taxes on her Federal income tax return for calendar year 2010 (filed in April 2011)? b.Assuming Wilma itemized deductions in 2010,how will the refund of $1,800 that she received in 2011 be treated for Federal income tax purposes? c.Assume that Wilma itemized deductions in 2010 and that she elects to have the $1,800 refund applied toward her 2011 state income tax liability.How will the $1,800 be treated for Federal income tax purposes? d.Assuming Wilma did not itemize deductions in 2010,how will the refund of $1,800 received in 2011 be treated for Federal income tax purposes?