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Exam 10: Deductions and Losses: Certain Itemized Deductions

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Question 1

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The election to itemize is appropriate when total itemized deductions are less than the standard deduction based on the taxpayer's filing status.

A) True
B) False

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Question 2

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Erica,Carol's daughter,has a mild form of autism.Dr.Malone recommends that Carol send Erica to a special school for autistic children when she enters first grade.Erica may include the cost of tuition,meals,and lodging for the special school when computing her medical expense deduction.

A) True
B) False

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Question 3

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Diego,who is single and lives alone,is physically handicapped as a result of a diving accident.In order to live independently,he modifies his personal residence at a cost of $20,000.The modifications included widening halls and doorways for a wheelchair,installing support bars in the bathroom and kitchen,installing a stairway lift,and rewiring so he could reach electrical outlets and appliances.Diego pays $200 for an appraisal that places the value of the residence at $124,000 before the improvements and $129,000 after.As a result of the operation of the stairway lift,Diego experienced an increase of $475 in his utility bills for the current year.Disregarding percentage limitations,how much of the above expenditures qualify as medical expense deductions?

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) ?

In order to dissuade his pastor from resigning and taking a position with a larger church,Michael,an ardent leader of the congregation,gives the pastor a new car.The cost of the car is deductible by Michael as a charitable contribution.

Jacqueline is employed as an architect.For calendar year 2011,she had AGI of $200,000 and paid the following medical expenses: Craig and Christine would qualify as Jacqueline's dependents except that they file a joint return.Jacqueline's medical insurance policy does not cover them.Jacqueline filed a claim for reimbursement of $6,000 of her own expenses with her insurance company in December 2011 and received the reimbursement in January 2012.What is Jacqueline's maximum allowable medical expense deduction for 2011?

In 2004,Ross,who is single,purchased a personal residence for $170,000 and took out a mortgage of $100,000 on the property.In May of the current year,when the residence had a fair market value of $220,000 and Ross owed $70,000 on the mortgage,he took out a home equity loan for $110,000.He used the funds to purchase a BMW for himself and a Lexus SUV for his wife.For both vehicles,100% of the use is for personal activities.What is the maximum amount on which Ross can deduct home equity interest?

Pat died this year.Before she died,Pat gave 5,000 shares of stock in Coyote Corporation (a publicly traded corporation) to her church (a qualified charitable organization) .The stock was worth $180,000 and she had acquired it as an investment four years ago at a cost of $150,000.In the year of her death,Pat had AGI of $300,000.In completing her final income tax return,how much of the charitable contribution should Pat's executor deduct?

Patrick and Leah are married and together have AGI of $100,000 in 2011.They have three dependents and file a joint return.They pay $3,000 for a high deductible health insurance policy and contribute $2,400 to a qualified Health Savings Account.During the year,they paid the following amounts for medical care: $8,200 in doctor and dentist bills and hospital expenses,and $2,500 for prescribed medicine and drugs.In December 2011,they received an insurance reimbursement of $3,400 for hospitalization.They expect to receive an additional reimbursement of $1,700 in January 2012.Determine the maximum deduction allowable for medical expenses in 2011.

For all of the current year,Randy (a calendar year taxpayer)allowed the Salvation Army to use a building he owns rent-free.The building normally rents for $24,000 a year.Randy will be allowed a charitable contribution deduction this year of $24,000.

In 2011,Terry pays $10,000 to become a charter member of Eastern University's Athletic Council.The membership ensures that Terry will receive choice seating at all of Eastern's home basketball games.Also in 2011,Terry pays $1,200 (the regular retail price) for season tickets for himself and his wife.For these items,how much qualifies as a charitable contribution?

Rosie owned stock in Acme Corporation that she donated to a university (a qualified charitable organization) on September 6,2011.What is the amount of Rosie's charitable contribution deduction assuming that she had purchased the stock for $20,100 on October 22,2010,and the stock had a value of $28,200 when she made the donation?

A medical expense does not have to relate to a particular ailment to be deductible.

Carolyn mailed a check for $1,000 to a qualified charitable organization on December 31,2011.The $1,000 contribution is not deductible on Carolyn's 2011 tax return because the charity does not receive the check until 2012.

Walter traveled to another city to obtain specialized outpatient medical care not available in his hometown.His sister accompanied him because he was too ill to travel alone.He may include the cost of his airfare and lodging (up to $50 per night for himself and up to $50 per night for his sister)in determining his medical expense deduction.

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

Leona borrows $100,000 from First National Bank and uses the proceeds to purchase City of Houston bonds.The interest Leona pays on this loan is deductible as investment interest subject to the investment interest limits.

Taxes assessed for local benefits,such as a new sidewalk,are not deductible as real property taxes.

In the year of her death,Maria made significant charitable contributions of capital gain property.In fact,the amount of the contributions exceeds 30% of her AGI.Maria's executor can elect to deduct charitable contributions of up to 50% of Maria's AGI on Maria's final income tax return.

In 2011,Linda sold her personal residence to Tom for $300,000.Before the sale,Linda paid the real estate taxes of $8,030 for the calendar year.For income tax purposes,the deduction is apportioned as follows: $4,400 to Linda and $3,630 to Tom. a.What is Tom's basis in the residence? b.What is Linda's amount realized from the sale of the residence? c.What amount of real estate taxes can Tom deduct? d.What amount of real estate taxes can Linda deduct?