Exam 10: Deductions and Losses: Certain Itemized Deductions

Your friend Scotty informs you that in 2019 he received a tax-free reimbursement of some medical expenses he paid in 2018. Which of the following statements best explains why Scotty is not required to report the reimbursement in gross income?

Nancy paid the following taxes during the year: Tax on residence (for the period from March 1 through August 31) \ 5,250 State motor vehicle tax (based on the value of the personal use automobile) 430 State sales tax 3,500 State income tax 3,050 Nancy sold her personal residence on June 30 of this year under an agreement in which the real estate taxes were not prorated between the buyer and the seller. What amount qualifies as a deduction from AGI for Nancy?

Adrienne sustained serious facial injuries in a motorcycle accident. To restore her physical appearance, Adrienne had cosmetic surgery. She cannot deduct the cost of this procedure as a medical expense.

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.

Leona borrows $100,000 from First National Bank and uses the proceeds to purchase City of Houston bonds. The interest Leona pays on this loan is deductible as investment interest subject to the investment interest limits.

Edna had an accident while competing in a rodeo. She sustained facial injuries that required cosmetic surgery. While having the surgery done to restore her appearance, she had additional surgery done to reshape her chin, which was not injured in the accident. The surgery to restore her appearance cost $9,000 and the surgery to reshape her chin cost $6,000. How much of Edna's surgical fees will qualify as a deductible medical expense (before application of the 10%-of-AGI floor)?

Georgia had AGI of $100,000 in 2019. She donated Heron Corporation stock with a basis of $8,500 to a qualified charitable organization on July 5, 2019. a. What is the amount of Georgia's deduction, assuming that she purchased the stock on December 4, 2018, and that the stock had a fair market value of $15,000 when she made the donation? (rather than $15,000) when Georgia donated it to the charity. b. Assume the same facts as in a. except that Georgia purchased the stock on July 1, 2011. c. Assume the same facts as in a. except that the stock had a fair market value of $6,000

Paul and Patty Black (both age 66) are married and together have AGI of $105,000 in 2019. They have two dependents and file a joint return. During the year, they paid $8,000 for medical insurance, $15,000 in doctor bills and hospital expenses, and $1,000 for prescribed medicine and drugs.2020. Determine the deduction allowable for medical expenses incurred in 2019. a. In December 2019, the Blacks received an insurance reimbursement of $3,500 for hospitalization expenses. Determine the deduction allowable for medical expenses paid during the year. b. Assume instead that the Blacks received the $3,500 insurance reimbursement in February c. Assume that the Blacks received the $3,500 insurance reimbursement in February 2020. Discuss whether the reimbursement will be included in their gross income for 2020.

To dissuade his pastor from resigning and taking a position with a larger church, Michael, an ardent leader of the congregation, gives the pastor a new car. The cost of the car is deductible by Michael as a charitable contribution.

Judy paid $40 for Girl Scout cookies and $40 for Boy Scout popcorn. She may claim an $80 charitable contribution deduction.

Emily, who lives in Indiana, volunteered to travel to Louisiana in March to work on a home-building project for Habitat for Humanity (a qualified charitable organization). She was in Louisiana for three weeks. She normally makes $500 per week as a carpenter's assistant and plans to deduct $1,500 as a charitable contribution. In addition, she incurred the following costs in connection with the trip: $600 for transportation, $1,200 for lodging, and $400 for meals. What is Emily's deduction associated with this charitable activity?

Tom, age 48, is advised by his family physician that he needs back surgery to correct a problem from his last back surgery. Since Tom is in a wheel chair, he needs his wife, Jean, to accompany him on his trip to Rochester, MN, for in-patient treatment at the Mayo Clinic, which specializes in this type of surgery. Tom incurred the following costs in 2019: Round-trip arfare ( \ 350 each) \ 700 Jean's hotel in Rochester for four nights ( \ 95 per night) 380 Jean's meals while in Rochester 105 Tom's medical treatment 3,500 Tom's prescription medicine 600 Compute Tom's allowable medical expenses for the trip (before application of the AGI floor).

Pedro's child attends a school operated by the church the family attends. Pedro made a donation of $1,000 to the church in lieu of the normal registration fee of $200. In addition, Pedro paid the regular tuition of $6,000 to the school. Based on this information, what is Pedro's charitable contribution?

Joe, a cash basis taxpayer, took out a 12-month business loan on December 1, 2019. He prepaid all $3,600 of the interest on the loan on December 1, 2019. Joe can deduct only $300 of the prepaid interest in 2019.

Sergio was required by the city to pay $2,000 for the cost of new curbing installed by the city in front of his personal residence. The new curbing was installed throughout Sergio's neighborhood as part of a street upgrade project. Sergio may not deduct $2,000 as a tax, but he may add the $2,000 to the basis of his property.

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.

Helen pays nursing home expenses of $3,000 per month for her mother. The monthly charge covers the following items: $1,400 for medical care, $900 for lodging, and $700 for food. Under what circumstances can Helen include the $3,000 per month payment when computing her medical expense deduction for the year? If Helen is not allowed to include the entire payment, how much can she include?

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 2019 was $75,000. How much of these expenditures can Phillip deduct as a medical expense in 2019?

Noah gave $750 to a good friend whose house was destroyed by an earthquake. In addition, Noah contributed his time, valued at $250, in the cleanup effort. Noah may claim a charitable deduction of $1,000 on his tax return for the current year.

In January 2020, Pam, a calendar year cash basis taxpayer, made an estimated state income tax payment for 2019. The payment is deductible in 2019.