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Exam 7: Individual From Agi Deductions

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Question 1

True/False

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Generally, service businesses are considered qualified trade or businesses for purposes of the deduction for qualified business income.

A) True
B) False

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Question 2

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The deduction to individual taxpayers for charitable contributions paid in cash to public charities is limited to 10 percent of the taxpayer's AGI.

A) True
B) False

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Question 3

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

Unreimbursed employee business expenses and hobby expenses are not deductible.

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 $8,260 in state income taxes and had mortgage interest of $5,500 ($400,000 acquisition indebtedness on her residence).If Kelly files single with AGI of $56,000, what amount of itemized deductions will she be eligible to claim?

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.

Jenna (age 50)files single and reports AGI of $40,000.This year she has incurred the following medical expenses: Calculate the amount of medical expenses that will be included with Jenna's other itemized deductions.

Which of the following costs is NOT deductible as an itemized medical expense?

Which of the following taxes will not qualify as an itemized deduction?

Frieda is 67 years old and deaf.If Frieda files as a head of household, what amount of standard deduction can she claim in 2019? Standard deduction

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), $6,000 on a $75,000 home-equity loan on his home (proceeds used to buy a car and pay off consumer debt), 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?

Rachel is an accountant who practices as a sole proprietor.This year, Rachel had net business income of $270,000 from her practice.Assume that Rachel pays $50,000 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 $225,000.Calculate Rachel's deduction for qualified business income.

Rachel is an engineer who practices as a sole proprietor.This year, Rachel had net business income of $500,000 from her business.Assume that Rachel pays $20,000 wages to her employees, she has $500,000 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.

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: 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 2019 taxable income if he files single.

Claire donated 200 publicly traded shares of stock (held for five 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.

Cesare is 16 years old and works throughout the year at a local coffee shop.This year, he made $9,200 at the coffee shop and earned $2,000 in interest income from his savings account.Assume that Cesare is claimed as a dependent on his parent's tax return.What is Cesare's standard deduction for the year?

Homer is an executive who is paid a salary of $80,000.Homer also paints landscapes as a hobby.This year Homer expects to sell paintings for a total of $750 and incur the following expenses associated with his painting activities: What is the effect of Homer's hobby on his taxable income?

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 the painting is used in the State Art Museum's charitable purpose.

Rachel is an accountant who practices as a sole proprietor.This year, Rachel had net business income of $200,000 from her practice.Assume that Rachel pays $50,000 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 $140,000.Calculate Rachel's deduction for qualified business income.

Which of the following is a true statement?