Exam 24: Itemized Deductions

In February of the current year (assume a non-leap year),Ken and Kelsey received their property tax statement for last calendar-year taxes of $1,600,which they paid to the taxing authority on March 1 of the current year.They had purchased their home on May 1 last year.What amount of property tax on this statement may they claim as an itemized deduction this year?

Leslie,who is single,finished graduate school this year and began repaying her student loan.The proceeds of the loan were used to pay her qualified higher education expenses.She has not received any type of educational assistance or scholarships.The amount of interest paid during the year amounted to $3,800.What is the amount and classification of her student loan interest education deduction if her modified AGI is $40,000?

Carl purchased a machine for use in his trade or business two years ago for $30,000.During the current year,Carl donates the machine to the local community college.At the time of the contribution,the machine's adjusted basis is $10,000 and its FMV is $15,000.Carl's AGI for the year is $48,000.What is the amount of his charitable contribution deduction?

Interest expense incurred in the taxpayer's trade or business is deductible as a for AGI deduction without limitation if the taxpayer materially participates in the business.

Corner Grocery,Inc.,a C corporation with high taxable income,donates some of its inventory to the County Food Bank (a charitable organization)which distributes food to the needy.At the time of the contribution,the FMV of the inventory was $20,000,and Corner Grocery's basis was $12,000.Corner Grocery will be allowed a charitable contribution deduction of

Self-employed individuals may deduct the full self-employment taxes paid as a for AGI deduction.

Mr.and Mrs.Gere,who are filing a joint return,have adjusted gross income of $50,000 in 2019.During the tax year,they paid the following medical expenses for themselves and for Mrs.Gere's mother,Mrs.Williams.The Geres could claim Mrs.Williams as their dependent,but she has too much gross income. Insulin for Mr. Gere \ 1,000 Health insurance premiums for Mr. and Mrs. Gere \ 3,100 Hospital bill for Mrs. Williams \ 5,200 Doctor bill for Mrs. Gere \ 4,000 Mr.and Mrs.Gere (both age 40)received no reimbursement for the above expenditures.What is the amount of their deductible itemized medical expenses?

Alan,who is a security officer,is shot while on the job.As a result,Alan suffers from a chronic leg injury and must use a wheelchair and undergo therapy to regain and retain strength.Alan's physician recommends that he install a whirlpool bath in his home for therapy.During the year,Alan makes the following expenditures: Wheelchair \ 1,200 Whirlpool bath 2,000 Maintenance of the whirlpool 250 Increased utility bills associated with whirlpool 450 Entrance ramp, various home modifications 7,200 A professional appraiser tells Alan that the whirlpool has increased the value of his home by $1,000.Alan's deductible medical expenses (before considering limitations based on AGI)will be

Expenditures for long-term care insurance premiums qualify as a medical expense deduction subject to an annual limit based upon the age of an individual.

Christopher,a cash-basis taxpayer,borrows $1,000 from ABC Bank by issuing a 3-month note on December 1,2019.Christopher receives $940 but must repay $1,000 on the due date.The amount of interest expense deductible in 2019 is $20.

Saskia is a 50% partner in a toy company.She is in the top tax bracket.The partnership has generated $2 million of qualified business income.The partnership paid W-2 wages of $880,000 and owns depreciable tangible property with an unadjusted basis of $1.2 million.What is Saskia's qualified business income deduction (ignoring self-employment taxes)?

Expenditures incurred in removing structural barriers in the home of a physically handicapped individual are deductible only to the extent the costs exceed the increase in fair market value to the property attributable to the capital expenditure.

On September 1,of the current year,Samuel,a cash-basis taxpayer,sells his cottage to Edward,also a cash-basis taxpayer for $100,000.Samuel's basis in the cottage is $65,000.The real property tax year is the calendar year.Real estate taxes on the property for the year are $3,650 and are payable on April 1 of the following year.The sales agreement does not provide for apportionment of real estate taxes between the buyer and seller.Assume Samuel pays all of the real estate taxes prior to the sale.The effects of this sales structure will be

Clayton contributes land to the American Red Cross for use as a future site for a new building.His AGI is $50,000.Clayton paid $20,000 for the land eight months ago but its market value at the date of contribution is $25,000.With no special elections,Clayton's deductible contribution this year is

Leo spent $6,600 to construct an entrance ramp and to widen doorways in his personal residence to make the home accessible for his wife,who is disabled and confined to a wheelchair.The $6,600 expenditure increased the value of the residence by $2,000.How much of the $6,600 is a deductible medical expense (before considering limits based on AGI)?

Which of the following is deductible as interest expense?

Linda had a swimming pool constructed at her house.Her physician advised and prescribed to her that the pool would slow the effects of her degenerative disease.The pool was not suitable for recreational use.Prior to the construction of the pool,the fair market value of her house was $172,000.After the construction of the pool,the appraised fair market value of the house was $181,000.The cost of the pool was $13,000.What is the amount of Linda's qualified medical expense (before considering limits based on AGI)?

Corporate charitable deductions are limited to 10% of the corporation's taxable income for the year.

Carol contributes a painting to a local museum for display.Her AGI is $60,000.Carol paid $22,000 for the painting in 2006,but its market value at the date of the contribution is $25,000.With no special elections,Carol's deductible contribution this year is

PG LLC is an accrual method partnership,manufacturing drones.Patty,75% partner in PG and a cash method taxpayer,lends $100,000 to PG as a working capital loan on January 1,2019,with interest due at an arms-length rate.PG accrues,and reports on its income statement,$5,000 of interest expense on this loan.PG pays the interest due to Patty on January 2,2020.On PG LLC's 2019 tax return,it will deduct the $5,000 interest expense.