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Exam 10: Deductions and Losses: Certain Itemized Deductions

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Question 51

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Samuel,an individual who has been physically handicapped for a year,paid $15,000 for the installation of wheelchair ramps,support bars,railings,and widening doorways in his personal residence.These improvements increased the value of his personal residence by $4,000.How much of Samuel's expenditures qualify as a medical expense deduction (subject to the 7.5% floor)? Explain.

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The full cost of certain home-related ca...

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Question 52

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In January 2013,Pam,a calendar year cash basis taxpayer,made an estimated state income tax payment for 2012.The payment is deductible in 2012.

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Question 53

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For purposes of computing the deduction for qualified residence interest,a qualified residence includes only the taxpayer's principal residence.

The reduced deduction election enables a taxpayer to move from the 30%-of-AGI limitation to the 50%-of-AGI limitation.

Emily,who lives in Indiana,volunteered to travel to Louisiana in March to work on a home-building project for Habitat for Humanity (a qualified charitable organization) .She was in Louisiana for three weeks.She normally makes $500 per week as a carpenter's assistant and plans to deduct $1,500 as a charitable contribution.In addition,she incurred the following costs in connection with the trip: $600 for transportation,$1,200 for lodging,and $400 for meals.What is Emily's deduction associated with this charitable activity?

Jack sold a personal residence to Steven and paid points of $3,500 on the loan to help Steven finance the purchase.Jack can deduct the points as interest.

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?

Brad,who uses the cash method of accounting,lives in a state that imposes an income tax (including withholding from wages) .On April 14,2012,he files his state return for 2011,paying an additional $600 in state income taxes.During 2012,his withholdings for state income tax purposes amount to $3,550.On April 13,2013,he files his state return for 2012 claiming a refund of $800.Brad receives the refund on June 3,2013.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 2012 (filed in April 2013) ?

In Shelby County,the real property tax year is the calendar year.The real property tax becomes a personal liability of the owner of real property on January 1 in the current real property tax year,2012.The tax is payable on June 1,2012.On April 30,2012,Julio sells his house to Anita for $230,000.On June 1,2012,Anita pays the entire real estate tax of $7,300 for the year ending December 31,2012.How much of the property taxes may Julio deduct?

Ron and Tom are equal owners in Robin Corporation.On July 1,2012,each loans the corporation $20,000 at annual interest of 10%.Ron and Tom are brothers.Both shareholders are on the cash method of accounting,while Robin Corporation is on the accrual method.All parties use the calendar year for tax purposes.On June 30,2013,Robin repays the loans of $40,000 together with the specified interest of $4,000.How much of the interest can Robin Corporation deduct in 2012?

In 2005,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?

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.

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

For purposes of computing the deduction for qualified residence interest,a qualified residence includes the taxpayer's principal residence and two other residences of the taxpayer or spouse.

In 2012,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?

In 2012 Michelle,single,paid $2,500 interest on a qualified student loan.Her MAGI was $70,000.She may deduct the $2,500 of interest as a deduction for AGI.

Warren sold his personal residence to Alicia on July 1,2012.He had paid $4,200 in real property taxes on March 1,2012,the due date for property taxes for 2012.Warren must increase the amount realized for his property by the portion of the $4,200 allocable to Alicia.

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?

Shirley pays FICA (employer's share)on the wages she pays her maid to clean and maintain Shirley's personal residence.The FICA payment is not deductible as an itemized deduction.

Georgia contributed $2,000 to a qualifying Health Savings Account in 2012.The entire amount qualifies as a medical expense and is potentially deductible as an itemized deduction.