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Exam 10: Deductions and Losses: Certain Itemized Deductions

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Question 1

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Joe,who is in the 33% tax bracket this year,expects to retire next year and be in the 25% tax bracket.He plans to donate $50,000 to his church.Because he will not have the cash available until next year,Joe donates land (long-term capital gain property) with a basis of $10,000 and fair market value of $50,000 to the church in December of the current year.He reacquires the land for $50,000 in February of next year.Discuss Joe's tax objectives and all tax issues related to his actions.

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Joe is attempting to accelerate his char...

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Question 2

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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 2015: Round-trip airfare ($350 each) $ 700 Jean's hotel in Rochester for four nights ($95 per night) 380 Jean's meals while in Rochester 105 Tom's medical treatment 3,500 Tom's prescription medicine 600 ​ Compute Tom's medical expenses for the trip (subject to the 10% floor) .

A) $4,000
B) $5,000
C) $5,180
D) $5,285
E) None of the above

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

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Question 3

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Joseph and Sandra,married taxpayers,took out a mortgage on their home for $350,000 15 years ago.In May of this year,when the home had a fair market value of $450,000 and they owed $250,000 on the mortgage,they took out a home equity loan for $220,000.They used the funds to purchase a single engine airplane to be used for recreational travel purposes.What is the maximum amount of debt on which they can deduct home equity interest?

Upon the recommendation of a physician,Ed has a swimming pool installed at his residence because of a heart condition.If he is allowed to deduct all or part of the cost of the pool,Ed's increase in utility bills due to the operation of the pool qualifies as a medical expense.

In 2015,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 transportation.

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 taxpayer may not deduct the cost of new curbing (relative to a personal residence),even if the construction is required by the city and the curbing provides an incidental benefit to the public welfare.

In 2016,Rhonda received an insurance reimbursement for medical expenses incurred in 2015.She is not required to include the reimbursement in gross income in 2016 if she claimed the standard deduction in 2015.

Sadie mailed a check for $2,200 to a qualified charitable organization on December 31,2015.The $2,200 contribution is deductible on Sadie's 2015 tax return.

Manny,age 57,developed a severe heart condition,and his physician advised him to install an elevator in his home.The cost of installing the elevator was $15,000,and the increase in the value of the residence was determined to be $5,800.Manny's AGI for the year was $52,000. a.How much of the expenditure can Manny deduct as a medical expense? a. ,except that Manny was paralyzed in an automobile accident and the expenditures were incurred to build entrance and exit ramps and widen the hallways in his home to accommodate his wheelchair.How much of the expenditure can Manny deduct as a medical expense? b. Assume the same facts as in part

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

Sandra is single and does a lot of business entertaining at home.Because Arthur,Sandra's 80-year old dependent grandfather who lived with Sandra,needs medical and nursing care,he moved to Twilight Nursing Home.During the year,Sandra made the following payments on behalf of Arthur: Room at Twilight $4,500 Meals for Arthur at Twilight 850 Doctor and nurse fees 700 Cable TV service for Arthur's room 107 Total $6,157 ​ Twilight has medical staff in residence.Disregarding the AGI floor,how much,if any,of these expenses qualify for a medical deduction by Sandra?

Richard,age 50,is employed as an actuary.For calendar year 2015,he had AGI of $130,000 and paid the following medical expenses: Medical insurance premiums $5,300 Doctor and dentist bills for Derrick and Jane (Richard's parents) 7,900 Doctor and dentist bills for Richard 5,100 Prescribed medicines for Richard 830 Nonprescribed insulin for Richard 960 Derrick and Jane would qualify as Richard's dependents except that they file a joint return.Richard's medical insurance policy does not cover them.Richard filed a claim for $4,800 of his own expenses with his insurance company in November 2015 and received the reimbursement in January 2016.What is Richard's maximum allowable medical expense deduction for 2015?

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 10% floor)? Explain.

Georgia had AGI of $100,000 in 2015.She donated Heron Corporation stock with a basis of $8,500 to a qualified charitable organization on July 5,2015. ​ a.What is the amount of Georgia's deduction,assuming that she purchased the stock on December 4,2014,and the stock had a fair market value of $15,000 when she made the donation? a. ,except that Georgia purchased the stock on July 1,2007. a. ,except that the stock had a fair market value of $6,000 (rather than $15,000) when Georgia donated it to the charity. b. Assume the same facts as in c. Assume the same facts as in

Grace's sole source of income is from a restaurant that she owns and operates as a proprietorship.Any state income tax Grace pays on the business net income must be deducted as a business expense rather than as an itemized deduction.

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 year (assume not a leap year),Harry sells his house to Judy for $110,000 and on July 1,Judy pays the entire real estate 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?

Zeke made the following donations to qualified charitable organizations during the year: Basis Fair Market Value Used clothing (all acquired more than a year ago) of taxpayer and his family $ 1,350 $ 375 Stock in ABC,Inc. ,held as an investment for fifteen months 12,000 10,875 Stock in MNO,Inc. ,held as an investment for eleven months 15,000 18,000 Real estate held as an investment for two years 15,000 30,000 ​ The used clothing was donated to the Salvation Army;the other items of property were donated to Eastern State University.Both are qualified charitable organizations.Disregarding percentage limitations,Zeke's charitable contribution deduction for the year is:

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.

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.