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Exam 6: Individual Deductions

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Question 31

Multiple Choice

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This year Norma, a single taxpayer, paid $11,200 of real estate taxes on her personal residence and $9,500 of state income taxes. Which of the following is true?

A) Norma can deduct $11,200 of real estate taxes as an itemized deduction
B) Norma can deduct $9,500 of state income taxes as a for AGI deduction
C) Norma can deduct $10,000 of taxes as an itemized deduction
D) If Norma has no other itemized deductions, she should still itemize her deductions
E) None of the choices are correct.

F) D) and E)
G) A) and E)

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Question 32

Multiple Choice

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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) B) and E)
G) B) and D)

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Question 33

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Madeoff donated stock (capital gain property) to a public charity. He purchased the stock three 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?

Which of the following is a true statement?

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

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; home is not rented out at any time). How much interest expense can Benjamin deduct as an itemized deduction?

Which of the following is a true statement?

Misti purchased a residence this year. Misti, age 32, is a single parent and lives with her 1-year-old daughter. In 2020, Misti received a salary of $160,000 and made the following payments: Misti files as a head of household. Calculate her taxable income this year.

Which of the following costs are deductible as an itemized medical expense?

Rachel is an accountant who practices as a sole proprietor. This year, Rachel had net business income of $270,000 (net of the deduction for self-employment taxes, the self-employed health insurance deduction, and the deduction for contributions to qualified self-employment retirement plans)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),she has no capital gains, and her taxable income before the deduction for qualified business income is $225,000, and she is unmarried. 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's2020 taxable income if he files single.

This year Latrell made the following charitable contributions: Determine the maximum amount of Latrell's charitable deduction assuming the Jones Foundation is a private nonoperating foundation and Latrell's AGI is $100,000 this year. You may assume that the stock and painting have been owned for 10 years.

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 parents' tax return. What is Cesare's standard deduction for the year?

Erika (age 62)was hospitalized with injuries from an auto accident this year. She incurred the following expenses from the accident: 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?

Rachel is an accountant who practices as a sole proprietor. This year, Rachel had net business income of $200,000 (net of the deduction for self-employment taxes, the self-employed health insurance deduction, and the deduction for contributions to qualified self-employment retirement plans)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),she has no capital gains, her taxable income before the deduction for qualified business income is $140,000, and she is unmarried. Calculate Rachel's deduction for qualified business income.

In 2020, 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 Museumin a manner consistent withthe museum's charitable purpose.

Qualified education expenses for purposes of the deduction of interest on educational loans are expenses paid for the education of the taxpayer, the taxpayer's spouse, or a taxpayer's dependent to attend a postsecondary institution of higher education.

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?

In general, taxpayers are allowed to deduct the fair market value of long-term capital gain property on the date of the donation to a qualified charitable organization.

To qualify as a charitable deduction, the donation must be made by cash or by check.