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Exam 10: Deductions and Losses: Certain Itemized Deductions

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Question 41

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Phyllis,a calendar year cash basis taxpayer who itemized deductions totaling $20,000,overpaid her 2014 state income tax and is entitled to a refund of $400 in 2015.Phyllis chooses to apply the $400 overpayment toward her state income taxes for 2015.She is required to recognize that amount as income in 2015.

A) True
B) False

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Question 42

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Karen,a calendar year taxpayer,made the following donations to qualified charitable organizations during the year: Basis Fair Market Value Cash donation to State University $30,000 $ 30,000 Unimproved land to the City of Terre Haute,Indiana 70,000 210,000 ​ 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) B) and C)
G) A) and D)

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Question 43

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Byron owned stock in Blossom Corporation that he donated to a museum (a qualified charitable organization) on June 8 this year.What is the amount of Byron's deduction assuming that he had purchased the stock for $10,500 last year on August 7,and the stock had a fair market value of $13,800 when he made the donation?

Fred and Lucy are married,ages 33 and 32,and together have AGI of $120,000 in 2015.They have four dependents and file a joint return.They pay $5,000 for a high deductible health insurance policy and contribute $2,600 to a qualified Health Savings Account.During the year,they paid the following amounts for medical care: $9,200 in doctor and dentist bills and hospital expenses,and $3,000 for prescribed medicine and drugs.In October 2015,they received an insurance reimbursement of $4,400 for the hospitalization.They expect to receive an additional reimbursement of $1,000 in January 2016.Determine the maximum itemized deduction allowable for medical expenses in 2015.

Linda borrowed $60,000 from her parents for a down payment on a condominium.She paid interest of $5,500 in 2013,$0 in 2014,and $9,000 in 2015.The IRS disallowed the deduction.Can you offer any explanation for the disallowance?

In April 2015,Bertie,a calendar year cash basis taxpayer,had to pay the state of Michigan additional income tax for 2014.Even though it relates to 2014,for Federal income tax purposes the payment qualifies as a tax deduction for tax year 2015.

Your friend Scotty informs you that he received a "tax-free" reimbursement in 2015 of some medical expenses he paid in 2014.Which of the following statements best explains why Scotty is not required to report the reimbursement in gross income?

On December 31,2015,Lynette used her credit card to make a $500 contribution to the United Way,a qualified charitable organization.She will pay her credit card balance in January 2016.If Lynette itemizes,she can deduct the $500 in 2015.

Noah gave $750 to a good friend whose house was destroyed by an earthquake.In addition,Noah contributed his time,valued at $250,in the cleanup effort.Noah may claim a charitable deduction of $1,000 on his tax return for the current year.

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.

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.

Ronaldo contributed stock worth $12,000 to the Children's Protective Agency,a qualified charity.He acquired the stock 20 months ago for $6,000.He may deduct $6,000 as a charitable contribution deduction (subject to percentage limitations).

In 2015,Brandon,age 72,paid $3,000 for long-term care insurance premiums.He may include the $3,000 in computing his medical expense deduction for the year.

Joe,a cash basis taxpayer,took out a 12-month business loan on December 1,2015.He prepaid all $3,600 of the interest on the loan on December 1,2015.Joe can deduct only $300 of the prepaid interest in 2015.

A physician recommends a private school for Ellen's dependent child.Because of the physician's recommendation,the cost of the private school will qualify as a medical expense deduction (subject to percentage limitations).

Which of the following items would be an itemized deduction on Schedule A of Form 1040 not subject to the 2%-of-AGI floor?

Ross,who is single,purchased a personal residence eight years ago 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?

Chad pays the medical expenses of his son,James.James would qualify as Chad's dependent except that he earns $7,500 during the year.Chad may claim James' medical expenses even if he is not a dependent.

Contributions to public charities in excess of 50% of AGI may be carried back 3 years or forward for up to 5 years.

For the past several years,Jeanne and her two sisters have taken turns claiming a dependency exemption deduction for their mother under a multiple support agreement.This year Jeanne will be entitled to the exemption,and her mother needs money for surgery and new eyeglasses.Should Jeanne pay for the medical expenses as her share of her mother's expenses? How would this benefit Jeanne?