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Exam 6: Individual Deductions

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Question 41

Multiple Choice

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Which of the following is a True statement?

A) Taxpayers may only deduct interest on up to $1,500,000 of acquisition indebtedness.
B) Taxpayers may deduct interest on up to $1,000,000 of home-equity debt.
C) The deduction for investment interest expense is not subject to limitation.
D) A taxpayer who incurs acquisition indebtedness in 2018 may only deduct interest on up to $750,000 of acquisition indebtedness.
E) None of the choices are correct.

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

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Question 42

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This year Darcy made the following charitable contributions: Determine the maximum amount of charitable deduction for Darcy's contribution of the painting if her AGI is $80,000 this year. You may assume that both the stock and painting have been owned for 10 years and that the painting was used by the State Art Museum consistent with museum's charitable purpose.

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The charitable deduction is $21,000 for ...

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Question 43

Multiple Choice

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Which of the following is a True statement?

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.

Which of the following is a True statement?

This year Riley files single and reports modified AGI of $71,000. Riley paid $1,200 of interest on a qualified education loan. What amounts can Riley deduct for qualifying education interest?

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?

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?

Kaylee is a self-employed investment counselor who also owns a rental property. This year, she collected $85,000 in fees and paid the following expenses: Kaylee files single. Calculate her adjusted gross income.

This year Tiffanie files as a single taxpayer. Tiffanie received $62,700 of salary and paid $3,200 of qualified educational interest. This year Tiffanie paid moving expenses of $5,000 and received $9,800 of alimony (from her ex-husband, divorced in 2012). What is Tiffanie's AGI?

All reasonable moving expenses are deductible by employees.

Rachel is an engineer who practices as a sole proprietor. This year, Rachel had net business income of $400,000 from her business. Assume that Rachel pays $150,000 wages to her employees, she has $20,000 of property (unadjusted basis of equipment she purchased last year), has no capital gains, and her taxable income before the deduction for qualified business income is $380,000. Calculate Rachel's deduction for qualified business income.

Glenn is an accountant who races stock cars as a hobby. This year Glenn was paid a salary of $80,000 from his employer and won $2,000 in various races. What is the effect of the racing activities on Glenn's taxable income if Glenn has also incurred $4,200 of hobby expenses this year? Assume that Glenn itemizes his deductions but has no other miscellaneous itemized deductions.

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?

Ned is a head of household with a dependent son, Todd, who is a full-time student. This year Ned made the following expenditures related to Todd's support: What amount can Ned include in his itemized deductions?

Opal fell on the ice and injured her hip this winter. As a result she paid $3,000 for a visit to the hospital emergency room and $750 for follow-up visits with her doctor. While she recuperated, Opal paid $500 for prescription medicine and $600 to a therapist for rehabilitation. Insurance reimbursed Opal $1,200 for these expenses. What is the amount of Opal's qualifying medical expense?

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

This year Amanda paid $749 in Federal gift taxes on a gratuitous transfer to her nephew. Amanda lives in Texas and does not pay any state or local income taxes. Which of the following is a True statement?

Self-employed taxpayers can deduct the cost of health insurance as a "for" AGI deduction as long as they do not actually participate in their spouses' employer-provided health plan.

Self-employed taxpayers can choose between claiming a deduction or a credit for the employer portion of self-employment taxes paid.