Exam 10: Deductions and Losses: Certain Itemized Deductions

Al contributed a painting to the Metropolitan Art Museum of St. Louis, MO. The painting, purchased six years earlier, was worth $40,000 when donated, and Al's basis was $25,000. If this painting is immediately sold by the museum and the proceeds are placed in the general fund, Al's charitable contribution deduction is $25,000 (subject to percentage limitations).

Herbert is the sole proprietor of a furniture store. He can deduct real property taxes on his store building as a business deduction but he cannot deduct state income taxes related to his net income from the furniture store as a business deduction.

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

Maria made significant charitable contributions of capital gain property in the current year. In fact, the amount of the contributions exceeds 30% of her AGI. The excess charitable contribution that is not deductible this year can be carried over for five years.

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.

Sandra is single and does considerable business entertaining at home. Because Arthur, Sandra's 80-year-old dependent grandfather who lived with Sandra, needs medical and nursing care, he moved to Twilight Nursing Home. During the year, Sandra made the following payments on behalf of Arthur: Room at Twilight \ 4,500 Meals for Arthur at Twilight 850 Doctor and nurse fees 700 Cable TV service for Arthur's room 107 Total \6 ,157 Twilight has medical staff in residence. Disregarding the AGI floor, how much, if any, of these expenses qualify for a medical deduction by Sandra?

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.

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).

Marilyn, age 38, is employed as an architect. For calendar year 2019, she had AGI of $204,000 and paid the following medical expenses: Medical insurance premiums \ 7,800 Doctor bills for Peter and Esther (Marilyn's parents) 7,300 Doctor and dentist bills for Marilyn 11,100 Frescription medicines for Marilyn 750 Nonprescription insulin for Marilyn 950 Peter and Esther would qualify as Marilyn's dependents except that they file a joint return. Marilyn's medical insurance policy does not cover them. Marilyn filed a claim for reimbursement of $6,000 of her own expenses with her insurance company in December 2019 and received the reimbursement in January 2020. What is Marilyn's maximum allowable medical expense deduction for 2019?

Byron owned stock in Blossom Corporation that he donated to a museum (a qualified charitable organization) on June 8 this year. What is the amount of Byron's deduction assuming that he had purchased the stock for $10,500 last year on August 7, and the stock had a fair market value of $13,800 when he made the donation?

Linda, who has AGI of $120,000 in the current year, contributes stock worth $65,000 in Mauve Corporation (a publicly traded corporation) to the Salvation Army, a qualified charitable organization. Linda acquired it as an investment four years ago at a cost of $50,000. a. What is the total amount that Linda can deduct as a charitable contribution, assuming that she carries over any disallowed contribution from the current year to future years? b. Describe the restrictions that apply when calculating the deduction in the carryover years.

The election to itemize is appropriate when total itemized deductions are less than the standard deduction based on the taxpayer's filing status.

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.

In April 2019, Bertie, a calendar year cash basis taxpayer, had to pay the state of Michigan additional income tax for2018. Even though it relates to 2018, for Federal income tax purposes, the payment qualifies as a tax deduction for tax year 2019.

Contributions to public charities in excess of 50% of AGI may be carried back three years or forward for up to five years.

Linda is planning to buy Vicki's home. They want to keep the transaction simple, so the sales agreement will not apportion the property taxes that Vicki has already paid on the home. Comment on the tax implications for Linda and Vicki.

Harry and Sally were divorced three years ago. In July of the current year, their son, Joe, broke his arm falling out of a tree. Joe lives with Sally, and she claims him as a dependent on her tax return. Harry paid for the medical expenses related to Joe's injury. Can Harry claim the medical expenses he paid for Joe on his tax return?

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).

A taxpayer pays points to obtain financing to purchase a second residence. At the election of the taxpayer, the points can be deducted as interest expense for the year paid.

Shirley pays FICA (employer's share) on the wages she pays her housekeeper to clean and maintain Shirley's personal residence. The FICA payment is not deductible as an itemized deduction.