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Exam 6: Individual Deductions

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Question 1

Multiple Choice

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Which of the following is a true statement?

A) Congress allows self-employed taxpayers to deduct the employer portion of their self-employment tax
B) To deduct expenses associated with any profit-motivated activity, taxpayers must maintain a high level of involvement or effort in the activity throughout the year
C) Business activities never require a relatively high level of involvement or effort from the taxpayer
D) All business expenses are deducted for AGI
E) All of these choices are correct.

F) All of the above
G) B) and E)

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Question 2

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Deductible medical expenses include payments to medical care providers such as doctors, dentists, and nurses and medical care facilities such as hospitals.

A) True
B) False

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Question 3

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Kaylee is a self-employed investment counselor who also owns a rental property. This year, she collected $85,300 in fees and paid the following expenses: Kaylee files single. Calculate her adjusted gross income.

Excess business lossesin 2020 are carried back and then forward.

To qualify as a charitable deduction, the donation must be made by cash or by check.

Max, a single taxpayer, has a $270,000 loss from his sole proprietorship. How much of this loss is not deductible after considering the excess business loss rules?

Which of the following is deductible as an other itemized deduction?

Campbell, a single taxpayer, has $400,000 of profits (net of the deduction for self-employment taxes, the self-employed health insurance deduction, and the deduction for contributions to qualified self-employment retirement plans) from her general store, which she operates as a sole proprietorship. She has no employees, $40,000 of qualified property, and $500,000 of taxable income before the deduction for qualified business income. How much is Campbell's deduction for qualified business income?

Larry recorded the following donations this year: $500 cash to a family in need $2,400 to a church $500 cash to a political campaign To the Salvation Army household items that originally cost $1,200 but are worth $300. What is Larry's maximum allowable charitable contribution if his AGI is $60,000?

Hector is a married, self-employed taxpayer, and this year he paid $3,000 for his health insurance premiums (not through an exchange) . Under which of the following alternative conditions can Hector deduct the cost of the premiums for AGI?

This year Amanda paid $749 in federal gift taxes on a gratuitous transfer to her nephew. Amanda lives in Texas and does not pay any state or local income taxes. Which of the following is a true statement?

Self-employed taxpayers can choose between claiming a deduction or a credit for the employer portion of self-employment taxes paid.

To be deductible, business expenses must be directly related to a business activity.

Toshiomi works as a sales representative and travels extensively for his employer's business. This year Toshiomi was paid $75,000 in salary and made the following expenditures: Toshiomi also made a number of trips to Las Vegas for gambling. This year Toshiomi won $12,000 in a poker tournament, and this amount was almost enough to offset his other gambling losses ($13,420). Calculate Toshiomi's2020 taxable income if he files single.

Simone donated a landscape painting (tangible capital gain property) to a library, a public charity. She purchased the painting five years ago for $50,000, and on the date of the gift, it had a fair market value of $200,000. What is her maximum charitable contribution deduction for the year if her AGI is $300,000?

Which of the following costs are deductible as an itemized medical expense?

The deduction for medical expenses is limited to the amount of unreimbursed qualifying medical expenses paid during the year reduced by 2 percent of the taxpayer's AGI.

Qualified education expenses for purposes of the deduction of interest on educational loans are expenses paid for the education of the taxpayer, the taxpayer's spouse, or a taxpayer's dependent to attend a postsecondary institution of higher education.

This year Darcy made the following charitable contributions: Determine the maximum amount of charitable deduction for Darcy's contribution of the painting if her AGI is $80,000 this year. You may assume that both the stock and painting have been owned for 10 years and that the painting was used by the State Art Museumin a manner consistent withthe museum's charitable purpose.

This year Latrell made the following charitable contributions: Determine the maximum amount of Latrell's charitable deduction assuming the Jones Foundation is a private nonoperating foundation and Latrell's AGI is $100,000 this year. You may assume that the stock and painting have been owned for 10 years.