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Exam 6: Individual Deductions

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Question 41

Multiple Choice

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Which of the following is a true statement?

A) the deduction of cash contributions to public charities is limited to 30 percent of AGI.
B) the deduction of capital gain property to private nonoperating foundations is limited to 50 percent of AGI.
C) the deduction of capital gain property to public charities is limited to 20 percent of AGI.
D) the deduction of cash contributions to private nonoperating foundations is limited to 30 percent of AGI.
E) None of these is true.

F) A) and D)
G) C) and E)

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Question 42

Multiple Choice

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Grace is a single medical student at State University, a qualified educational institution. This year Grace paid university tuition of $12,000. Grace works part-time at the University library, and this year she reports $15,000 of salary and no other items of income or expense. Which of the following is a true statement?

A) Grace can deduct all of her tuition for AGI as a business expense.
B) Grace can deduct all of her tuition as a miscellaneous itemized deduction.
C) Grace can only deduct half of her tuition for AGI as a business expense.
D) Grace can only deduct half of her tuition as a miscellaneous itemized deduction.
E) All of these are false.

F) C) and D)
G) A) and E)

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Question 43

Multiple Choice

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Which of the following is a true statement?

This year, Benjamin Hassell paid $20,000 of interest on a mortgage on his home (Benjamin borrowed $600,000 to buy the residence and it is currently worth $1,000,000), $12,000 on a $150,000 home equity loan on his home, and $10,000 of interest on a mortgage on his vacation home (loan of $300,000; home purchased for $400,000). How much interest expense can Benjamin deduct as an itemized deduction?

This fall, Josh paid $5,000 for his tuition and fees at State University (a qualified education institution) . Assume that Josh is Marsha and Jeff's son and that Marsha and Jeff claim Josh as a dependent. Marsha and Jeff's modified AGI is $100,000. How much of Josh's $5,000 tuition and fees payments can Marsha and Jeff deduct this year (assume the 2013 rules apply for purposes of the qualified education expense deduction) ?

Glenn is an accountant who races stock cars as a hobby. This year Glenn was paid a salary of $80,000 from his employer and won $2,000 in various races. What is the effect of the racing activities on Glenn's taxable income if Glenn has also incurred $4,200 of hobby expenses this year? Assume that Glenn itemizes his deductions but has no other miscellaneous itemized deductions.

Taxpayers are allowed to deduct all ordinary and necessary expenses incurred in connection with determining their tax obligations imposed by federal authorities.

Which of the following expenses can be deducted as moving expenses? 1. The cost of a trip to purchase a new residence 2) The cost of moving personal belongings 3) Lodging (one night) while en route 4) The cost of gasoline when traveling to the new residence 5) One-half of the cost of meals while en route to the new residence

Grace is employed as the manager of a sandwich shop. This year she earned a salary of $45,000 and incurred the following expenses associated with her employment: Subscriptions to food publications $\quad\quad\quad\quad\quad\quad\quad\quad\$300$ Cooking class ("How to make better subs") $\quad\quad\quad\quad\quad250$ Transportation between Grace's home and the shop $\quad\quad\quad500$ What amount of miscellaneous itemized deductions can Grace include with her other allowable itemized deductions?

Which of the following is a true statement?

Which of the following is a true statement?

Jenna (age 50) files single and reports AGI of $40,000. This year she has incurred the following medical expenses: $\begin{array}{llcc} \text { Dentist charges } & \$90 \\ \text {Physician's fees } &2,800\\ \text { Cosmetic surgery } &400\\ \text { Cost of eyeglasses} &250\\ \text { Hospital charges } &1,330\\ \text { Prescription drugs} &240\\ \text { Over-the-counter drugs}&75\\\text { Medical insurance premiums (not through}&1,200\\\text { an exchange)}&\end{array}$ Calculate the amount of medical expenses that will be included with Jenna's other itemized deductions.

Chuck has AGI of $70,000 and has made the following payments $\begin{array} { l r } \text { State income tax withholding } & \$ 1,900 \\\text { State income tax estimated payments } & 850 \\\text { Federal income tax withholding } & 7,100 \\\text { Social Security tax withheld from wages } & 4,800 \\\text { State excise tax on liquor } & 400 \\\text { State inheritance tax } & 1,200 \\\text { County real estate tax } & 790 \\\text { School district tax on realty } & 510\end{array}$ Calculate the amount of taxes that Chuck can include with his itemized deductions.

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

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?

Which of the following is a true statement?

Self employed taxpayers can deduct the cost of health insurance as long as they do not actually participate in their spouses' employer-provided health plan.

Colby is employed full time as a food technician for a local restaurant chain. This year he has incurred the following expenses associated with his employment: $\begin{array} { l r } \text { Transportation between various restaurants } & \$ 280 \\\text { Technician uniforms (not adaptable to daily wear) } & 310 \\\text { Professional dues and license } & 1,200\end{array}$ Colby was reimbursed $125 of the expenses from his employer's accountable plan. What amount can he include with his remaining itemized deductions if his AGI this year is $32,000?

In general, taxpayers are allowed to deduct the fair market value of capital gain property on the date of the donation to a qualified charitable organization.

In 2013, taxpayers may elect to deduct state and local sales taxes instead of deducting state and local income taxes.