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Exam 10: Deductions and Losses: Certain Itemized Deductions

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Question 21

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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.

A) True
B) False

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Question 22

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Karen, a calendar year taxpayer, made the following donations to qualified charitable organizations during the year: The land had been held as an investment and was acquired 4 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:

A) $100,000.
B) $165,000.
C) $225,000.
D) $240,000.
E) None of the above.

F) A) and B)
G) A) and C)

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Question 23

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

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 and 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 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 × $.14) relating to her volunteer work.

Samuel, a 36 year old 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%-of-AGI floor)? Explain.

Bill paid $2,500 of medical expenses for his daughter, Marie. Marie is married to John and they file a joint return. Bill can include the $2,500 of expenses when calculating his medical expense deduction.

Charitable contributions that exceed the percentage limitations for the current year can be carried over for up to three years.

In Piatt 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 and is payable on July 1 in the real property tax year. On June 30 of this yea (assume it is not a leap year), Harry sells his house to Judy for $110,000 and on July 1, Judy pays the entire real estat tax of $4,380 for the current year ending December 31. a. How much of the property taxes may Harry deduct? b. How much of the property taxes may Judy deduct?

Maria made significant charitable contributions of capital gain property in the current year. In fact, the amount of the contributions exceeds 30% of her AGI. The excess charitable contribution that is not deductible this year can be carried over for five years.

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.

During the year, Eve (a resident of Billings, Montana) spends three consecutive weeks in Louisville, Kentucky. One week is spent representing the Billings First Christian Church at the national convention, and two weeks are spent vacationing with relatives. One third of Eve's travel expenses will qualify as a charitable deduction.

Diane contributed a parcel of land to the United Way. In addition, she contributed bibles and song books from her proprietorship's book store inventory to First Church, a qualified charitable organization. Should Diane's charitable contribution deduction for these contributions be determined by the basis or fair market value of the contributed items?

During 2018, 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?

Matt, a calendar year taxpayer, pays $11,000 in medical expenses in 2018. He expects $5,000 of these expenses to be reimbursed by an insurance company in 2019. In determining his medical expense deduction for 2018, Matt must reduce his 2018 medical expenses by the amount of the reimbursement he expects in 2019.

Hannah makes the following charitable donations in the current year: The HBM stock and the inventory were given to Hannah's church, and the baseball card collection was given to the United Way. Both donees promptly sold the property for the stated fair market value. Disregarding percentage limitations, Hannah's current charitable contribution deduction is:

Which of the following items would be an itemized deduction on Schedule A of Form 1040?

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.

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

Barry and Larry, who are brothers, are equal owners in Chickadee Corporation. On July 1, 2018, each loans the corporation $10,000 at an annual interest rate of 10%. Both shareholders are on the cash method of accounting, while Chickadee Corporation is on the accrual method. All parties use the calendar year for tax purposes. On June 30, 2019, Chickadee repays the loans of $20,000 together with the specified interest of $2,000. How much of the interest can Chickadee Corporation deduct in 2018?