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Exam 10: Deductions and Losses: Certain Itemized Deductions

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Question 41

True/False

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Any personal expenditures not specifically allowed as itemized deductions by the tax law are nondeductible (unless they are deductible in arriving at AGI).

A) True
B) False

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Question 42

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Contributions to public charities in excess of 50% of AGI may be carried back 3 years or forward for up to 5 years.

A) True
B) False

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Question 43

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David,a single taxpayer,took out a mortgage on his home for $300,000 nine years ago.In August of this year,when the home had a fair market value of $550,000 and he owed $225,000 on the mortgage,he took out a home equity loan for $350,000.David used the funds to purchase a yacht to be used for recreational purposes.What is the maximum amount of debt on which he can deduct home equity interest?

Jeanne had an accident while hiking on vacation.She sustained nose injuries that required cosmetic surgery.While having the surgery done to restore her appearance,she had additional surgery done to reshape her chin,which was not injured in the accident.The surgery to restore her appearance cost $15,000 and the surgery to reshape her chin cost $4,000.How much of Jeanne's surgical fees will qualify as a deductible medical expense (before application of the 7.5% limitation) ?

Jerry pays $5,000 tuition to a parochial school run by his church in order to enable his daughter to attend.This is the amount the school charges all students.Part of the tuition payments can be claimed as a charitable contribution.

Chad pays the medical expenses of his son,James.James would qualify as Chad's dependent except that he earns $7,500 during the year.Chad may not claim James' medical expenses because he is not a dependent.

Letha incurred a $1,600 prepayment penalty to a lending institution because she paid off the mortgage on her home early.The $1,600 is deductible as interest expense.

During 2012,Ralph made the following contributions to the University of Oregon (a qualified charitable organization) : Ralph acquired the stock in Raptor,Inc.,as an investment fourteen months ago at a cost of $42,000.Ralph's AGI for 2012 is $189,000.What is Ralph's charitable contribution deduction for 2012?

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.

Brian,a self-employed individual,pays state income tax payments of: $900 on January 17,2012 (4th estimated tax payment for 2011) $1,000 on April 16,2012 (1st estimated tax payment in 2012) $1,000 on June 15,2012 (2nd estimated tax payment in 2012) $1,000 on September 17,2012 (3rd estimated tax payment in 2012) $800 on January 15,2013 (4th estimated tax payment of 2012)

Taxes assessed for local benefits,such as a new sidewalk,are not deductible as real property taxes.

In 2013,Rhonda received an insurance reimbursement for medical expenses incurred in 2012.She is not required to include the reimbursement in gross income in 2013 if she claimed the standard deduction in 2012.

Herbert is the sole proprietor of a furniture store.He can deduct real property taxes on his store building but he cannot deduct state income taxes related to his net income from the furniture store as a business deduction.

Margaret,who is self-employed,paid $6,000 for medical insurance coverage.She can include the $6,000 when calculating her medical expense deduction.

Leona borrows $100,000 from First National Bank and uses the proceeds to purchase City of Houston bonds.The interest Leona pays on this loan is deductible as investment interest subject to the investment interest limits.

Virginia had AGI of $100,000 in 2012.She donated Amber Corporation stock with a basis of $9,000 to a qualified charitable organization on July 5,2012.

Employee business expenses for travel qualify as itemized deductions subject to the 2% floor if they are not reimbursed.

In applying the percentage limitations,carryovers of charitable contributions must be claimed after contributions in the current year are considered (FIFO rule).

Roger is employed as an actuary.For calendar year 2012,he had AGI of $130,000 and paid the following medical expenses: Derrick and Jane would qualify as Roger's dependents except that they file a joint return.Roger's medical insurance policy does not cover them.Roger filed a claim for $4,800 of his own expenses with his insurance company in November 2012 and received the reimbursement in January 2013.What is Roger's maximum allowable medical expense deduction for 2012?

Judy paid $40 for Girl Scout cookies and $40 for Boy Scout popcorn.Judy may claim an $80 charitable contribution deduction.