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Exam 6: Individual Deductions

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Question 21

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When taxpayers donate cash and capital gain property to a public charity, the AGI percentage limitation is applied in the following order:

A) a 30 percent of AGI limitation is applied to the aggregate donation.
B) a 60 percent of AGI limitation is applied to the cash donation and a 20 percent of AGI limitation is applied to the fair market value of the capital gain donation.
C) a 30 percent of AGI limitation is applied to the cash donation and a 20 percent of AGI limitation is applied to the fair market value of the capital gain donation.
D) a 60 percent of AGI limitation is applied to the cash donation and the fair market value of the capital gain donation is subject to the lesser of a 30 percent of AGI limitation or a 50 percent of AGI limitation after subtracting the cash contributions.
E) donations to public charities are not subject to AGI limitations.

F) None of the above
G) C) and E)

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Question 22

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Which of the following is a true statement?

A) Unreimbursed employee business expenses are not deductible.
B) Investment advisory expenses are not deductible.
C) Business deductions are one of the most common deductions for AGI but they are not readily visible on the front of Form 1040.
D) The distinction between business and investment expenses is critical for determining whether a deduction is claimed above the line (for AGI) or below the line (itemized) .
E) All of the choices are correct.

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

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Question 23

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Scott is a self-employed plumber and his wife, Emily, is a full-time employee for the University. Emily has health insurance from a qualified plan provided by the University, but Scott has chosen to purchase his own health insurance rather than participate in Emily's plan. Besides paying $5,400 for his health insurance premiums, Scott also pays the following expenses associated with his plumbing business: What is the amount of deductions for AGI that Scott can claim this year (2018)?

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

This fall Millie finally repaid her student loan. She originally borrowed the money to pay tuition several years ago when she attended at State University (a qualified educational institution) . This year Millie paid a total of $2,400 of interest on the loan. If Millie files single and reports $70,000 of income and no other items of income or expense how much of the interest can she deduct?

Excess business losses are carried back and then forward as net operating losses.

Rental or royalty expenses are deductible "for" AGI.

This year, Benjamin Hassell paid $20,000 of interest on a mortgage on his home (Benjamin borrowed $600,000 in 2015 to buy the residence and it is currently worth $1,000,000), $12,000 on a $150,000 home equity loan on his home, and $10,000 of interest on a mortgage on his vacation home (loan of $300,000; home purchased for $400,000 in 2016). How much interest expense can Benjamin deduct as an itemized deduction?

Larry recorded the following donations this year: $500 cash to a family in need $2,400 to a church $500 cash to a political campaign To the Salvation Army household items that originally cost $1,200 but are worth $300. What is Larry's maximum allowable charitable contribution if his AGI is $60,000?

Andres and Lakeisha are married and file joint. Andres is 72 years old and in good health. Lakeisha is 62 years old and blind. What amount of standard deduction can Andres and Lakeisha claim in 2018?

The profit motive distinguishes "business" activities from "personal" activities.

All investment expenses are itemized deductions.

Lewis is an unmarried law student at State University, a qualified educational institution. Last year Lewis borrowed $30,000 and used the proceeds to pay his university tuition. This year Lewis paid $1,500 of interest on the loan. Which of the following is a true statement if Lewis reports $40,000 of salary and no other items of income or expense?

Which of the following is a true statement?

Madeoff donated stock (capital gain property) to a public charity. He purchased the stock 3 years ago for $100,000, and on the date of the gift, it had a fair market value of $200,000. What is his maximum charitable contribution deduction for the year related to this stock if his AGI is $500,000 (before considering the itemized deduction phase-out) ?

Which of the following is a true statement?

Tita, a married taxpayer filing joint, has a $700,000 business loss from her S corporation. Assume the $700,000 loss satisfies the basis, at-risk, and passive loss rules. Assume also that neither she nor her husband has any other business losses or business income. How much of the $700,000 loss may she deduct this year?

Which of the following is a deductible miscellaneous itemized deduction?

Claire donated 200 publicly-traded shares of stock (held for 5 years) to her father's nonoperating private foundation this year. The stock was worth $15,000 but Claire's basis was only $4,000. Determine the maximum amount of charitable deduction for the donation if Claire's AGI is $60,000 this year.

This year, Jong paid $3,000 of interest on a qualified education loan. Jong files married filing joint and reports modified AGI of $147,000. What is Jong's deduction for interest expense on an educational loan?