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Exam 10: Deductions and Losses: Certain Itemized Deductions

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Question 51

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In 2019, Rhonda received an insurance reimbursement for medical expenses incurred in 2018. She is not required to include the reimbursement in gross income in 2019 if she claimed the standard deduction in 2018.

A) True
B) False

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Question 52

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During the current year, Ralph made the following contributions to the University of Oregon (a qualified charitable organization) : Cash $63,000 Stock in Raptor, Inc. (a publicly traded corporation) 94,500 Ralph acquired the stock in Raptor as an investment 14 months ago at a cost of $42,000. Ralph's AGI for the year is $189,000. What is his charitable contribution deduction for the current year?

A) $56,700
B) $63,000
C) $94,500
D) $157,500
E) None of these

F) B) and D)
G) B) and C)

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Question 53

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Charles, who is single and age 61, had AGI of $400,000 during 2019. He incurred the following expenses and losses during the year. $\begin{array}{lr}\text { Medical expenses before AGI floor } & \$ 38,500 \\\text { State and local income taxes } & 15,200 \\\text { Real estate taxes } & 4,400 \\\text { Home mortgage interest } & 5,400 \\\text { Charitable contributions } & 14,800 \\\text { Unreimbursed employee expenses } & 8,900 \\\text { Gambling losses (Charles had \$7,400 of gambling income) } & 9,800\\\text { Compute Charles's total itemized deductions for the year. }\end{array}$

George is single and age 56, has AGI of $265,000, and incurs the following expenditures in 2019. $\begin{array}{lr}\text { Medical expenses (before 10\%-of-AGI floor) } & \$ 35,000 \\\text { Interest on home mortgage } & 15,500 \\\text { State income tax } & 7,500 \\\text { State sales tax } & 4,500 \\\text { Real estate tax } & 8,600 \\\text { Charitable contribution } & 6,500\end{array}$ What is the amount of itemized deductions George may claim?

Tom, whose MAGI is $40,000, paid $3,500 of interest on a qualified student loan in 2019. He is single and may deduct the $3,500 interest as an itemized deduction.

During 2019, Kathy, who is self-employed, paid $650 per month for an HSA contract that provides medical insurance coverage with a $3,000 deductible. The plan covers Kathy, her husband, and their three children. Of the $650 monthly fee, $300 was for the high-deductible policy, and $350 was deposited into an HSA. How much of the amount paid for the high-deductible policy can Kathy deduct as a deduction for AGI?

Paul, a calendar year single taxpayer, has the following information for 2019: $\begin{array}{lr}\text { AGI } & \$ 175,000 \\\text { State income taxes } & 13,500 \\\text { State sales tax } & 3,000 \\\text { Real estate taxes } & 18,900 \\\text { Gambling losses (gambling gains were } \$ 12,000 \text { ) } & 6,800\end{array}$ Paul's allowable itemized deductions for 2019 are:

Pat gave 5,000 shares of stock in Coyote Corporation (a publicly traded corporation) to her church (a qualified charitable organization) in the current year. The stock was worth $180,000. She had acquired it as an investment four years ago at a cost of $120,000. She reported AGI of $300,000 for the year. In completing her current income tax return, how much is her current-year charitable contribution deduction?

This year Dena traveled 600 miles for specialized medical treatment that was not available in her hometown. She paid $90 for meals during the trip, $145 for a hotel room for one night, and $15 in parking fees. She did not keep records of other out-of-pocket costs for transportation. Dena can include $180 in computing her medical expenses.

Zeke made the following donations to qualified charitable organizations during the year: $\begin{array}{lcc}&\text { Basis}&\text { Fair Market }\\&&\text { Value }\\\begin{array}{l}\text { Used clothing of taxpayer and his family (all acquired } \\\text { more than a year ago) }\end{array} & \$ 1,350 & \$ 375 \\\begin{array}{l}\text { Stock in ABC, Inc., held as an investment for 15 } \\\text { months }\end{array} & 12,000 & 10,875 \\\begin{array}{l}\text { Stock in MNO, Inc., held as an investment for 11 } \\\text { months }\end{array} & 15,000 & 18,000 \\\text { Real estate held as an investment for two years } & 15,000 & 30,000\end{array}$ 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 the year is:

On December 31, Lynette used her credit card to make a $500 contribution to the United Way, a qualified charitable organization. She will pay her credit card balance in January of the following year. If Lynette itemizes, she can deduct the $500 in the year she used the card.

Karen, a calendar year taxpayer, made the following donations to qualified charitable organizations during the year: $\begin{array}{lcr}&\text { Basis}&\text { Fair Market }\\&&\text { Value }\\\text { Cash donation to State University } & \$ 30,000 & \$ 30,000 \\\text { Unimproved land to the City of Terre Haute, IN } & 70,000 & 210,000\end{array}$ The land had been held as an investment and was acquired four years ago. Shortly after receipt, the City of Terre Haute sold the land for $210,000. Karen's AGI is $450,000. The allowable charitable contribution deduction this year is:

In 2019, Brandon, age 72, paid $5,000 for long-term care insurance premiums. He may include the $5,000 in computing his medical expense deduction for the year.

Brian, a self-employed individual, pays state income tax payments of: $900 on January 15, 2019 (4th estimated tax payment for 2018) $1,000 on April 16, 2019 (1st estimated tax payment in 2019) $1,000 on June 17, 2019 (2nd estimated tax payment in 2019) $1,000 on September 16, 2019 (3rd estimated tax payment in 2019) $800 on January 15, 2020 (4th estimated tax payment of 2019) Brian had a tax overpayment of $500 on his 2018 state income tax return and applied this to his 2019 state income taxes. What is the amount of Brian's state income tax itemized deduction for his 2019 Federal income tax return?

Brad, who uses the cash method of accounting, lives in a state that imposes an income tax (including withholding from wages) . On April 14, 2019, he files his state return for 2018, paying an additional $600 in state income taxes. During 2019, his withholdings for state income tax purposes amount to $3,550. On April 13, 2020, he files his state return for 2019 claiming a refund of $800. Brad receives the refund on June 3, 2020. If he itemizes deductions, how much may Brad claim as a deduction for state income taxes on his Federal income tax return for calendar year 2019 (filed in April 2020) ?

Jim's employer pays half of the premiums on a group medical insurance plan covering all employees, and employees pay the other half. Jim can exclude the half of the premium paid by his employer from his gross income and may include the half he pays in determining his medical expense deduction.

This year Allison drove 800 miles to volunteer in a project sponsored by a qualified charitable organization in Utah. In addition, she spent $250 for meals while away from home. In total, Allison may take a charitable contribution deduction of $112 (800 miles × $0.14) relating to her volunteer work.

Matt, a calendar year taxpayer, pays $11,000 in medical expenses in 2019. He expects $5,000 of these expenses to be reimbursed by an insurance company in 2020. In determining his medical expense deduction for 2019, Matt must reduce his 2019 medical expenses by the amount of the reimbursement he expects in 2020.

Brad, who would otherwise qualify as Faye's dependent, had gross income of $9,000 during the year. Faye, who had AGI of $120,000, paid the following medical expenses this year: $\begin{array}{lr}\text { Cataract operation for Brad } & \$ 5,400 \\\text { Brad's prescribed contact lenses } & 1,800 \\\text { Faye's doctor and dentist bills } & 12,600 \\\text { Frescribed drugs for Faye } & 2,550 \\\text { Total }&\$22,350\end{array}$ Faye has a medical expense deduction of:

Manny, age 57, developed a severe heart condition, and his physician advised him to install an elevator in his home. The cost of installing the elevator was $17,000, and the increase in the value of the residence was determined to be $5,800. Manny's AGI for the year was $52,000. a. A capital improvement that ordinarily would not have a medical purpose qualifies as a medical expense if it is directly related to prescribed medical care and is deductible to the extent that the expenditure exceeds the increase in value of the related property. The medical expense deduction is $6,000 [($17,000 - $5,800) - a. How much of the expenditure can Manny deduct as a medical expense? a. except that Manny was paralyzed in an automobile accident and the expenditures were incurred to build entrance and exit ramps and widen the hallways in his home to accommodate his wheelchair. How much of the expenditure can Manny deduct as a medical expense? b. Assume the same facts as in part