Exam 10: Deductions and Losses: Certain Itemized Deductions

Employee business expenses for travel may be deducted as itemized deductions if they are not reimbursed.

Mindy paid an appraiser to determine how much a capital improvement made for medical reasons increased the value of her personal residence. The appraisal fee qualifies as a deductible medical expense.

Ronaldo contributed stock worth $12,000 to the Children's Protective Agency, a qualified charity. He acquired the stock 20 months ago for $7,000. He may deduct $7,000 as a charitable contribution deduction subject to percentage limitations).

Matt, a calendar year taxpayer, pays $11,000 in medical expenses in 2018. He expects $5,000 of these expenses to be reimbursed by an insurance company in 2019. In determining his medical expense deduction for 2018, Matt must reduce his 2018 medical expenses by the amount of the reimbursement he expects in 2019.

During the year, Victor spent $300 on bingo games sponsored by his church. If all profits went to the church, Victor has a charitable contribution deduction of $300.

A physician recommends a private school for Ellen's dependent child. Because of the physician's recommendation, the cost of the private school will qualify as a medical expense deduction subject to percentage limitations).

Letha incurred a $1,600 prepayment penalty to a lending institution because she paid off the mortgage on her home early. The $1,600 is deductible as interest expense.

Phyllis, who is single, has itemized deductions totaling $20,000. She overpaid her 2017 state income tax and is entitled to a refund of $400 in 2018. Phyllis chooses to apply the $400 overpayment toward her state income taxes for 2018. She is required to recognize that amount as income in 2018.

Phillip, age 66, developed hip problems and was unable to climb the stairs to reach his second-floor bedroom. His physician advised him to add a first-floor bedroom to his home. The cost of constructing the room was $32,000. The increase in the value of the residence as a result of the room addition was determined to be $17,000. In addition, Phillip paid the contractor $5,500 to construct an entrance ramp to his home and $8,500 to widen the hallways to accommodate his wheelchair. Phillip's AGI for 2018 was $75,000. How much of these expenditures can Phillip deduct as a medical expense in 2018?

This year, Carol, a single taxpayer, purchased a vacation home for $400,000 using an equity debt of $350,000 on her principal residence. Carol has no other debt on her principal residence. Carol paid $16,000 of interest on the debt this year. How much of this interest is deductible assuming Carol itemizes her deductions?

A taxpayer may not deduct the cost of new curbing relative to a personal residence), even if the construction is required by the city and the curbing provides an incidental benefit to the public welfare.

Maria traveled to Rochester, Minnesota, with her son, who had surgery at the Mayo Clinic. Her son stayed at the clinic for the duration of his treatment. She paid airfare of $300 and $50 per night for lodging. The cost of Maria's airfare and lodging cannot be included in determining her medical expense deduction.

Dan contributed stock worth $16,000 to his college alma mater, a qualified charity. He acquired the stock 11 months ago for $4,000. He may deduct $16,000 as a charitable contribution deduction subject to percentage limitations).

Joe, a cash basis taxpayer, took out a 12-month business loan on December 1, 2018. He prepaid all $3,600 of the interest on the loan on December 1, 2018. Joe can deduct only $300 of the prepaid interest in 2018.

Georgia contributed $2,000 to a qualifying Health Savings Account in the current year. The entire amount qualifies as an expense deductible for AGI.

In 2018, Brandon, age 72, paid $5,000 for long-term care insurance premiums. He may include the $5,000 in computing his medical expense deduction for the year.

Gambling losses may be deducted to the extent of the taxpayer's gambling winnings.

Tom, whose MAGI is $40,000, paid $3,500 of interest on a qualified student loan in 2018. Tom is single. He may deduct the $3,500 interest as an itemized deduction.

On December 31, Lynette used her credit card to make a $500 contribution to the United Way, a qualified charitable organization. She will pay her credit card balance in January of the following year. If Lynette itemizes, she can deduct the $500 in the year she used the card.

Chad pays the medical expenses of his son, James. James would qualify as Chad's dependent except that he earns $7,500 during the year. Chad may claim James' medical expenses even if he is not a dependent.