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Exam 7: Individual From Agi Deductions

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Question 1

True/False

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Taxpayers filing single and taxpayers filing married separate have the same basic standard deduction amount.

A) True
B) False

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Question 2

Multiple Choice

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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?

A) $100,000
B) $92,000
C) $60,000
D) $46,000 if the church sells the inventory
E) None of the above

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

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B

Question 3

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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.

Jim was in an auto accident this year. Jim paid $2,450 to repair his personal-use car after the accident and his insurance only reimbursed him $400. Jim bought his car several years ago for $1,500. What is the amount of casualty loss from this accident before Jim applies any casualty loss floor limitations?

Grace is employed as the manager of a sandwich shop. This year she earned a salary of $45,000 and incurred the following expenses associated with her employment: $\begin{array} { | l | r | } \hline \text { Transportation to various tournaments } & \$ 3,450 \\\hline \text { Lodging } & 1,890 \\\hline \text { Entry tees } & 920 \\\hline \text { Golf supplies (balls, tees, etc.) } & 75 \\\hline\end{array}$ What amount of miscellaneous itemized deductions can Grace claim on Schedule A if these are her only miscellaneous itemized deductions?

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

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

Detmer is a successful doctor who earned $204,800 in fees this year, but he also competes in weekend golf tournaments. Detmer reported the following expenses associated with competing in almost a dozen tournaments: $\begin{array} { | l | r | } \hline \text { Dentist charges } & \$ 90 \\\hline \text { Physician's fees } & 2,800 \\\hline \text { Cosmetic surgery } & 400 \\\hline \text { Cost of eyeglasses } & 250 \\\hline \text { Hospital charges } & 1,330 \\\hline \text { Prescription drugs } & 240 \\\hline \text { Over-the-counter drugs } & 75 \\\hline \text { Medical insurance premiums } & 1,200 \\\hline\end{array}$ This year Detmer won $5,200 from competing in various golf tournaments. Assuming that Detmer itemizes his deductions and that he did not have any other miscellaneous itemized deductions, what amount of the golfing expenses are deductible after considering all limitations if the tournament golfing is treated as a hobby activity?

This year Kelly bought a new auto for $20,000 plus $1,650 in state and local sales taxes. Besides this sales tax, Kelly also paid $5,260 in state income taxes and had other itemized deductions (e.g., mortgage interest) of $3,500. If Kelly files single with AGI of $56,000, what amount of itemized deductions will she be eligible to claim?

Karin and Chad (ages 30 and 31, respectively) are married and together have $110,000 of AGI. This year they have recorded the following expenses: $\begin{array} { | l | r | } \hline \text { Home mortgage interest } & \$ 2,335 \\\hline \text { Real estate taxes } & 1,525 \\\hline \text { State income taxes paid } & 1,340 \\\hline \text { Income tax preparation fee } & 250 \\\hline \text { Charitable contributions (cash to their church) } & 120 \\\hline\end{array}$ Karin and Chad will file married joint with two personal exemptions. Calculate their taxable income.

Margaret Lindley paid $15,000 of interest on her $300,000 acquisition debt for her home (fair market value of $500,000) , $4,000 of interest on her $30,000 home-equity loan, $1,000 of credit card interest, and $3,000 of margin interest for the purchase of stock. Assume that Margaret Lindley has $10,000 of interest income this year and no investment expenses. How much of the interest expense may she deduct this year?

Rochelle, a single taxpayer (age 47), has an AGI of $275,200. This year, she paid medical expenses of $30,000, state income taxes of $4,000, mortgage interest of $10,600, and charitable contributions of $6,000. What would be the amount of her total itemized deductions she may claim on her tax return?

The deduction to individual taxpayers for charitable contributions paid in cash made to public charities is limited to ten percent of the taxpayer's AGI whereas casualty losses on personal assets are only deductible to the extent the losses exceed ten percent of the taxpayer's AGI.

Jon and Holly are married and live in a retirement community. This year Jon celebrated his 65^th birthday and Holly turned 68 years old. For their ages, both Jon and Holly are in good health. This year the only significant expense that they incurred was an unreimbursed medical expense of $3,200. If Jon and Holly together have AGI of $42,000, what is the amount of their standard deduction this year?

In 2016, personal and dependency exemptions are $6,300 for single taxpayers.

Simone donated a landscape painting (tangible capital gain property) to a library, a public charity. She purchased the painting five years ago for $50,000, and on the date of the gift, it had a fair market value of $200,000. What is her maximum charitable contribution deduction for the year if her AGI is $300,000 (before considering the itemized deduction phase-out) ?

Erika (age 67) was hospitalized with injuries from an auto accident this year. She incurred the following expenses from the accident: $\begin{array} { | l | r | } \hline \text { Nursing uniforms } & \$ 1,650 \\\hline \text { Union dues } & 400 \\\hline \text { Professional dues and license } & 800 \\\hline \text { Continuing education courses } & 450 \\\hline\end{array}$ In addition, Erika's auto was completely destroyed in the accident. She bought the car several years ago for $18,000 and it was worth $4,700 at the time of the accident. What are Erika's itemized deductions this year if she was uninsured and her AGI is $40,000?

Which of the following is a true statement?

Frieda is 67 years old and deaf. If Frieda files as a head of household, what amount of standard deduction can she claim in 2016?

Taxpayers generally deduct the lesser of their standard deduction or their itemized deductions.