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Exam 6: Individual Deductions

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Question 1

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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 2

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This year Norma paid $1,200 of real estate taxes on her personal residence. Norma's other itemized deductions (state income taxes) only amount to $3,100. Which of the following is a true statement if Norma files single with one personal exemption?

A) Norma can deduct 4,300 for AGI.
B) Norma can deduct $1,200 even if her standard deduction is $6,200.
C) Norma should deduct $4,300 even if her standard deduction is $6,200.
D) Norma can deduct $3,100 even if her standard deduction is $6,200.
E) Norma should claim the standard deduction.

F) A) and C)
G) A) and E)

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Question 3

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All reasonable moving expenses are deductible if the move is a minimum of 35 miles in distance.

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 if her AGI is $200,000?

Clark is a registered nurse and full time employee of the Hays Hospital. To maintain his nursing license Clark has incurred the following expenses: $\begin{array}{llcc} \text { Nursing uniforms } & \$1,650 \\ \text { Union dues } &400\\ \text { Professional dues and license } &800\\ \text {Continuing education courses } &450\\\end{array}$ Clark was reimbursed $1,250 of his expenses from his Hays Hospital accountable reimbursement plan. What amount can he include with his remaining itemized deductions if his AGI this year is $52,000?

Toshiomi works as a sales representative and travels extensively for his employer's business. This year Toshiomi was paid $75,000 in salary and made the following expenditures: $\begin{array}{llcc} \text { State income taxes withheld } &\$6,300 \\ \text { Employee business expenses (unreimbursed portion) } &1,450\\ \text {Charitable contributions } &200\\ \text { Investment counseling fees } &780\\ \text { Tax preparation fee} &310\\\end{array}$ Toshiomi also made a number of trips to Las Vegas for gambling. This year Toshiomi won $12,000 in a poker tournament and this amount was almost enough to offset his other gambling losses ($13,420). Calculate Toshiomi's taxable income if he files single with one personal exemption.

Bryan is 67 years old and lives alone. This year he has received $25,000 in taxable interest and pension payments, and he has paid the following expenses: $\begin{array}{llcc} \text { Real estate taxes } & \$1,640\\ \text {Medical expenses ( \$ 2,000 was reimbursed by insurance) } &3,650\\ \text {Charitable contributions (cash to the Unity church) } &460\\\end{array}$ If Bryan files single with one personal exemption, calculate his taxable income.

All business expense deductions are claimed above the line.

Congress allows self-employed taxpayers to deduct the cost of health insurance above the line (for AGI) because:

This year, Jong paid $3,000 of interest on a qualified education loan. Jong files married joint and reports modified AGI of $142,000. What is Jong's deduction for interest expense on an educational loan?

Alexandra operates a garage as a sole proprietorship. Alexandra also owns a half interest in a partnership that operates a gas station. This year Alexandra paid or reported the following expenses related to her garage and other property. Determine Alexandra's AGI for 2014. $\begin{array}{llcc} \text {Revenue from auto repairs } & \$143,930\\ \text { Salaries paid to mechanics} &72,210\\ \text { Supplies and tools } &18,500\\ \text { Revenues from gas station partnership (Alexandra's share) } &125,000\\ \text { Expenses from gas station partnership (Alexandra's share) } &95,200\\ \text { Self-employment tax ( 1 / 2 is employer's share} &12,702\\\end{array}$

Taxpayers are allowed to deduct mortgage interest on up to $1,000,000 of acquisition debt for their qualified residence and on up to $500,000 of home-equity debt.

To deduct a moving expense, the taxpayer must be employed or self employed for a specific amount of time after the move.

The deduction for medical expenses is limited to the amount of unreimbursed qualifying medical expenses paid during the year reduced by five percent of the taxpayer's AGI.

Collin and Christine are married and file joint. Their dependent son, Trevor, is a full-time college student at a qualified educational institution. This year Collin and Christine borrowed $30,000 to pay for Trevor's tuition ($22,000) and room and board ($8,000). At year end Collin paid $3,200 in interest on the loan. What amounts can Collin and Christine deduct for interest and education expenses if they estimate that their AGI will be $133,000 absent any deductions for AGI (assume the 2013 rules apply for purposes of the qualified education expense deduction)?

Last year Henry borrowed $15,000 to help pay for his dependent daughter's college tuition. This year Henry paid $2,800 of interest on the loan. How much, if any, interest can Henry deduct if he files single with AGI of $72,500?

An individual who forfeits a penalty for prematurely withdrawing a certificate of deposit (CD) is allowed to net the penalty against the interest income from the CD.

Qualified education expenses for purposes of the deduction of interest on educational loans are expenses paid for the education of the taxpayer, the taxpayer's spouse, or a taxpayer's dependent to attend a post-secondary institution of higher education.

The deduction for investment interest in excess of the net investment income carries forward to the subsequent year.

Which of the following itemized deductions is not subject to the itemized deduction phase-out?