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Exam 10: Deductions and Losses: Certain Itemized Deductions

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Question 31

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Emily,who lives in Indiana,volunteered to travel to Louisiana in March to work on a home-building project for Habitat for Humanity (a qualified charitable organization) .She was in Louisiana for three weeks.She normally makes $500 per week as a carpenter's assistant and plans to deduct $1,500 as a charitable contribution.In addition,she incurred the following costs in connection with the trip: $600 for transportation,$1,200 for lodging,and $400 for meals.What is Emily's deduction associated with this charitable activity?

A) $600
B) $1,200
C) $1,800
D) $2,200
E) $3,700

F) A) and B)
G) None of the above

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Question 32

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Trent sells his personal residence to Chester on July 1,2017.He had paid $7,000 in real property taxes on March 1,2017,the due date for property taxes for 2017.Trent may not deduct the portion of the taxes he paid for the period the property was owned by Chester.

A) True
B) False

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Question 33

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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.

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?

Marilyn,age 38,is employed as an architect.For calendar year 2017,she had AGI of $204,000 and paid the following medical expenses: ​ Peter and Esther would qualify as Marilyn's dependents except that they file a joint return.Marilyn's medical insurance policy does not cover them.Marilyn filed a claim for reimbursement of $6,000 of her own expenses with her insurance company in December 2017 and received the reimbursement in January 2018.What is Marilyn's maximum allowable medical expense deduction for 2017?

Maria traveled to Rochester,Minnesota,with her son,who had surgery at the Mayo Clinic.Her son stayed at the clinic for the duration of his treatment.She paid airfare of $300 and $50 per night for lodging.The cost of Maria's airfare and lodging cannot be included in determining her medical expense deduction.

On December 31,2017,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 2018.If Lynette itemizes,she can deduct the $500 in 2017.

In 2018,Rhonda received an insurance reimbursement for medical expenses incurred in 2017.She is not required to include the reimbursement in gross income in 2018 if she claimed the standard deduction in 2017.

Your friend Scotty informs you that he received a "tax-free" reimbursement in 2017 of some medical expenses he paid in 2016.Which of the following statements best explains why Scotty is not required to report the reimbursement in gross income?

In Lawrence 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 in the current real property tax year (assume this year is not a leap year) .The tax is payable on June 1.On May 1,Reggie sells his house to Dana for $350,000.On June 1,Dana pays the entire real estate tax of $7,950 for the year ending December 31.How much of the property taxes may Reggie deduct?

Mindy paid an appraiser to determine how much a capital improvement made for medical reasons increased the value of her personal residence.The appraisal fee qualifies as a deductible medical expense.

For purposes of computing the deduction for qualified residence interest,a qualified residence includes only the taxpayer's principal residence.

Linda is planning to buy Vicki's home.They want to keep the transaction simple,so the sales agreement will not apportion the property taxes that Vicki has already paid on the home.Comment on the tax implications for Linda and Vicki.

Dan contributed stock worth $16,000 to his college alma mater,a qualified charity.He acquired the stock 11 months ago for $4,000.He may deduct $16,000 as a charitable contribution deduction (subject to percentage limitations).

Capital assets donated to a public charity that would result in long-term capital gain if sold,are subject to the 30%-of-AGI ceiling limitation on charitable contributions for individuals.

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:

Tom,age 48,is advised by his family physician that he needs back surgery to correct a problem from his last back surgery.Since Tom is in a wheel chair,he needs his wife,Jean,to accompany him on his trip to Rochester,Minnesota,for in-patient treatment at the Mayo Clinic,which specializes in this type of surgery.Tom incurred the following costs in 2017: ​ Compute Tom's medical expenses for the trip (subject to the 10%-of-AGI floor) .

A taxpayer pays points to obtain financing to purchase a second residence.At the election of the taxpayer,the points can be deducted as interest expense for the year paid.

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?

Aaron,age 45,had AGI of $40,000 for 2017.He was injured in a skiing accident and paid $3,600 for hospital expenses and $1,400 for doctor bills.Aaron also incurred medical expenses of $1,200 for his child,who lives with his former wife and is claimed as a dependent by her.In 2018,Aaron was reimbursed $1,300 by his insurance company for the medical expenses attributable to the skiing accident. a.Compute Aaron's deduction for medical expenses in 2017. b.Assume that Aaron would have elected to itemize his deductions even if he had no medical expenses in 2017. How much, if any, of the $1,300 reimbursement must be included in gross income in 2018? c.Assume that Aaron's other itemized deductions in 2017 were $8,000 and that he filed as a head of household. How much of the $1,300 reimbursement must he include in gross income in 2018?