Exam 24: Itemized Deductions

The qualified business income deduction is only available to owners of businesses operated in a form other than the C corporation form.

Mr.and Mrs.Thibodeaux (both age 35),who are filing a joint return,have adjusted gross income of $90,000 in 2019.During the tax year,they paid the following medical expenses for themselves and for Mrs.Thibodeaux's mother,Mrs.Watson (age 63).Mrs.Watson provided over one-half of her own support. Prescription drugs for Thibodeaux \ 3,600 General vitamins for Mrs. Thibodeaux \ 100 Doctor bill for Mr. Thibodeaux \ 1,800 Doctor bill for Mrs. Thibodeaux \ 4,000 Hospital bill for Mrs. Watson \ 2,200 Mr.and Mrs.Thibodeaux received no reimbursement for the above expenditures.What is the amount of their deductible itemized medical expenses?

Arun paid the following taxes this year: Real estate taxes on rental property he owns \ 4,000 Real estate taxes on his own residence 3,600 Federal income taxes 8,000 State income taxes 3,400 Local city income taxes 500 What amount can Arun deduct as an itemized deduction on his tax return?

A medical expense is generally deductible only in the year in which the expense is actually paid.

Medical expenses incurred on behalf of children of divorced parents are deductible by the parent who pays the expenses but only if the child qualifies as a dependent of that parent.

Takesha paid $13,000 of investment interest expense in a year in which she earned $4,500 in dividends,$5,400 in interest income,and had a short-term capital gain of $1,000 and a long-term capital gain of $2,200.The capital gains resulted from the sale of stock held as an investment.She has no other investment-related expenses.What is her maximum deduction for investment interest expense,assuming Takesha does not make any elections?

A taxpayer can deduct a reasonable amount for small out-of-pocket (i.e.,cash)donations.

Assessments or fees imposed by the government for specific privileges or services are not deductible as taxes.

Qualified residence interest must be acquisition indebtedness and be secured by the residence.

When both borrowed and owned funds are mingled in the same account,for purposes of categorizing interest expense,a repayment of the debt is allocated first to

Jeffrey,a T.V.news anchor,is concerned about the wrinkles around his eyes.Because it is job-related,the cost of a face lift to eliminate these wrinkles is a deductible medical expense.

Raj is a 50% shareholder in an S corporation.In the current year,he is reporting $50,000 of salary,$2,000 of interest income,$20,000 of qualified business income from the S corporation and $10,000 of long-term capital gain.Raj's taxable income before the qualified business income deduction is $65,000.Raj will be allowed a QBI deduction of

Steve and Marian purchase a new condominium in Manhattan on February 1,2019 to use as their primary residence.The purchase price of the condominium is $1.5 million.The couple obtained a $1.0 million mortgage from the bank and paid the balance in cash.On their joint tax return the couple will be allowed an itemized deduction for interest expense on a principal balance of up to

Hope is a marketing manager at a local company.Information about her 2019 income and expenses is as follows: Income received Salary \ 150,000 Taxes withheld from salary: Federal income tax \ 30,000 State income tax 9,000 Social Security tax 8,209 Medicare tax 2,175 Interest income from bank 6,000 Dividend income from U.S. stocks 4,000 Short-term capital gain 2,000 Long-term capital gain 3,000 State income tax refund from lastyear 500 Expenses paid: Unreimbursed dental and eyecare costs \ 1,800 Property taxes on her home 3,900 Fees paid to town for garbage pick-up 400 Stock donated to American Red Cross; FMV \ 5,000 ; purchased three years ago for \ 3,100 Home mortgage interest 10,000 Investment interest expense 11,000 Interest on car loan 300 Compute Hope's taxable income for the year in good form.Show all supporting computations.Hope is single,and she elects to itemize her deductions each year.Assume she does not make any elections regarding the investment interest expense.Also assume that her tax profile was similar in the preceding year.

Grace has AGI of $60,000 in 2019 and 2020.She makes cash contributions to public charities of $40,000 in 2019 and $37,000 in 2020.Grace's charitable contribution carryover to 2021 is

Teri pays the following interest expenses during the year: Home mortgage interest on personal residence \ 8,500 Credit card interest on personal purchases 550 Interest on loans used to purchase investments (Net investment income is \ 2,000) 2,400 Interest on loans used for a business conducted as a sole proprietorship 3,800 Interest on a credit card used exclusively in the business 470 What is the amount of interest expense that can be deducted as an itemized deduction?

Claudia refinances her home mortgage on June 1 of the current year.She obtains a 30-year mortgage at 5%.As part of the refinancing,she pays points of $3,600 (a customary practice in her location).What amount,if any,of the points are deductible?

Doug pays a county personal property tax on his automobile of $1,500.The $1,500 includes $800 based on the weight of the car and $700 based on the value of the car.How much of the tax can Doug deduct on his tax return?

Wayne and Maria purchase a home on April 1 of the current year.In order to obtain a thirty-year mortgage,they are required to pay $7,200 in points at closing.Charging points is a customary business practice in the area.In addition,they pay $4,400 of interest during the year.What is their current year deduction related to their home?

During February and March,Jade spends approximately 90 hours of her time volunteering at the Salvation Army (a public charity)preparing tax returns for low-income families.As a CPA,Jade normally bills her clients at $130 per hour for her time.Jade also drives her car a total of 800 miles in performing her voluntary work.Jade's deductible contribution is