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Exam 6: Individual Deductions

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Question 41

Multiple Choice

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Mason paid $4,100 of interest on a loan that paid tuition for him to attend a private university this year. How much of this payment can Mason deduct as interest expense on an educational loan if he files single and reports modified AGI of $90,000?

A) $4,100
B) $4,000
C) $2,667
D) $2,000
E) None of the choices are correct.

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

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Question 42

True/False

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The medical expense deduction is designed to provide relief for doctors and medical practitioners.

A) True
B) False

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Question 43

Multiple Choice

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Which of the following is a true statement?

To be deductible, business expenses must be appropriate and helpful for generating a profit.

Lewis is an unmarried law student at State University, a qualified educational institution. Last year Lewis borrowed $30,000 and used the proceeds to pay his university tuition. This year Lewis paid $1,500 of interest on the loan. Which of the following is a true statement if Lewis reports $40,000 of salary and no other items of income or expense?

Rachel is an accountant who practices as a sole proprietor. This year, Rachel had net business income of $200,000 (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 practice. Assume that Rachel pays $50,000 wages to her employees, she has $20,000 of property (unadjusted basis of equipment she purchased last year),she has no capital gains, her taxable income before the deduction for qualified business income is $140,000, and she is unmarried. Calculate Rachel's deduction for qualified business income.

Taxpayers traveling for the primary purpose of receiving essential and deductible medical care may deduct the cost of travel.

For married taxpayers filing separately, excess business losses are fully deductible in 2020.

This year Tiffanie files as a single taxpayer. Tiffanie received $73,100 of salary and paid $3,250 of qualified educational interest. This year Tiffanie paid moving expenses of $6,800 and received $8,900 of alimony (from her ex-husband, whom she divorced in 2012). What is Tiffanie's AGI?

Carly donated inventory (ordinary income property) to a church. She purchased the inventory last month for $100,000, and on the date of the gift, it had a fair market value of $92,000. What is her maximum charitable contribution deduction for the year related to this inventory if her AGI is $200,000?

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 $100,000 of employee wages, $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?

Which of the following is a true statement?

In 2020, 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.

The deduction to individual taxpayers for charitable contributions paid in cash to public charities is limited to 10 percent of the taxpayer's AGI.

Which of the following is a true statement in 2020?

This fall Millie finally repaid her student loan. She originally borrowed the money to pay tuition several years ago, when she attended State University (a qualified educational institution) . This year Millie paid a total of $2,400 of interest on the loan. If Millie files single and reports $75,000 of income and no other items of income or expense, how much of the interest can she deduct?

Rachel is an accountant who practices as a sole proprietor. This year, Rachel had net business income of $270,000 (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 practice. Assume that Rachel pays $50,000 wages to her employees, she has $20,000 of property (unadjusted basis of equipment she purchased last year),she has no capital gains, and her taxable income before the deduction for qualified business income is $225,000, and she is unmarried. Calculate Rachel's deduction for qualified business income.

Claire donated 200 publicly traded shares of stock (held for five years)to her father's nonoperating private foundation this year. The stock was worth $15,000 but Claire's basis was only $4,000. Determine the maximum amount of charitable deduction for the donation if Claire's AGI is $60,000 this year.

Which of the following is a true statement?

Rachel is an engineer who practices as a sole proprietor. This year, Rachel had net business income of $500,000 (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 business. Assume that Rachel pays $20,000 wages to her employees, she has $500,000 of property (unadjusted basis of equipment she purchased last year), she has no capital gains, her taxable income before the deduction for qualified business income is $380,000, and she is unmarried. Calculate Rachel's deduction for qualified business income.