Exam 6: Individual Deductions

Kaylee is a self-employed investment counselor who also owns a rental property. This year, she collected $85,500 in fees and paid the following expenses: Kaylee files single. Calculate her adjusted gross income.

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Question 1

Correct Answer:

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${{[a(13)]:#,###}} = ${{[a(1)]:#,###}} − ${{[a(12)]:#,###}}.The books on investing, advertising for investment clients, repairs for the rental property, [a(10)] percent of the self-employment taxes, and health insurance premiums are deductible for AGI. The whole life insurance premiums are not deductible, and the state income taxes are only deductible from AGI.

This year Kelly bought a new auto for $20,000 plus $1,650 in state and local sales taxes. Besides this sales tax, Kelly also paid $8,260 in state income taxes and had mortgage interest of $5,500 ($400,000 acquisition indebtedness on her residence). If Kelly files single with AGI of $56,000, what amount of itemized deductions will she be eligible to claim?

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Question 2

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$13,760 = $8,260 + $5,500. State income taxes, but not sales taxes, are included with other itemized deductions when determining total itemized deductions. A taxpayer could elect to deduct state sales taxes instead of state income taxes. Nonetheless, Kelly would not make this election because her state income taxes ($8,260)exceed her state sales taxes.

Max, a single taxpayer, has a $270,000 loss from his sole proprietorship. How much of this loss is deductible after considering the excess business loss rules?

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Question 3

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The deduction to individual taxpayers for charitable contributions paid in cash to public charities is limited to 10 percent of the taxpayer's AGI.

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Question 4

Margaret Lindley paid $15,030 of interest on her $300,300 acquisition debt for her home (fair market value of $500,300), $4,030 of interest on her $30,030 home-equity loan, $1,030 of credit card interest, and $3,030 of margin interest for the purchase of stock. Assume that Margaret Lindley has $10,030 of interest income this year and no investment expenses. How much of the interest expense may she deduct this year?

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Question 5

Chuck has AGI of $70,000 and has made the following payments: Calculate the amount of taxes that Chuck can include with his itemized deductions.

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Question 6

Self-employed taxpayers can deduct the cost of health insurance as a "for" AGI deduction as long as they do not actually participate in their spouses' employer-provided health plans.

(True/False)

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Question 7

Excess business lossesin 2020 are carried back and then forward.

(True/False)

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Question 8

Which of the following is a true statement in 2020?

(Multiple Choice)

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Question 9

This year, Jong paid $3,000 of interest on a qualified education loan. Jong files married filing jointly and reports modified AGI of $152,000. What is Jong's deduction for interest expense on an educational loan?

(Multiple Choice)

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Question 10

Alexandra operates a garage as a sole proprietorship. Alexandra also owns a half interest in a partnership that operates a gas station. This year Alexandra paid or reported the following expenses related to her garage and other property. Determine Alexandra's AGI for 2020.

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Question 11

Which of the following is a true statement?

(Multiple Choice)

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Question 12

Andres and Lakeisha are married and file jointly. Andres is 72 years old and in good health. Lakeisha is 62 years old and blind. What amount of standard deduction can Andres and Lakeisha claim in 2020?

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Question 13

Rachel is an engineer who practices as a sole proprietor. This year, Rachel had net business income of $400,000(net of the deduction for self-employment taxes, the self-employed health insurance deduction, and the deduction for contributions to qualified self-employment retirement plans)from her business. Assume that Rachel pays $150,000 wages to her employees, she has $20,000 of property (unadjusted basis of equipment she purchased last year),she has no capital gains, her taxable income before the deduction for qualified business income is $380,000, and she is unmarried. Calculate Rachel's deduction for qualified business income.

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Question 14

All investment expenses are itemized deductions.

(True/False)

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Question 15

The medical expense deduction is designed to provide relief for doctors and medical practitioners.

(True/False)

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Question 16

Jon and Holly are married and live in a retirement community. This year Jon celebrated his 65th birthday and Holly turned 68 years old. For their ages, both Jon and Holly are in good health. What is the amount of their standard deduction this year?

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Question 17

Which of the following is a true statement?

(Multiple Choice)

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Question 18

The itemized deduction for taxes includes all types of state, local, and foreign taxes.

(True/False)

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Question 19

Detmer is a successful doctor who earned $204,800 in fees this year, but he also competes in weekend golf tournaments. Detmer reported the following expenses associated with competing in almost a dozen tournaments: This year Detmer won $5,200 from competing in various golf tournaments. Assuming that Detmer itemizes his deductions, what amount of the golfing expenses are deductible after considering all limitations if the tournament golfing is treated as a hobby activity?

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Question 20

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Exam 6: Individual Deductions

Kaylee is a self-employed investment counselor who also owns a rental property. This year, she collected $85,500 in fees and paid the following expenses: Kaylee files single. Calculate her adjusted gross income.

Max, a single taxpayer, has a $270,000 loss from his sole proprietorship. How much of this loss is deductible after considering the excess business loss rules?

The deduction to individual taxpayers for charitable contributions paid in cash to public charities is limited to 10 percent of the taxpayer's AGI.

Chuck has AGI of $70,000 and has made the following payments: Calculate the amount of taxes that Chuck can include with his itemized deductions.

Self-employed taxpayers can deduct the cost of health insurance as a "for" AGI deduction as long as they do not actually participate in their spouses' employer-provided health plans.

Excess business lossesin 2020 are carried back and then forward.

Which of the following is a true statement in 2020?

This year, Jong paid $3,000 of interest on a qualified education loan. Jong files married filing jointly and reports modified AGI of $152,000. What is Jong's deduction for interest expense on an educational loan?

Alexandra operates a garage as a sole proprietorship. Alexandra also owns a half interest in a partnership that operates a gas station. This year Alexandra paid or reported the following expenses related to her garage and other property. Determine Alexandra's AGI for 2020.

Which of the following is a true statement?

Andres and Lakeisha are married and file jointly. Andres is 72 years old and in good health. Lakeisha is 62 years old and blind. What amount of standard deduction can Andres and Lakeisha claim in 2020?

All investment expenses are itemized deductions.

The medical expense deduction is designed to provide relief for doctors and medical practitioners.

Jon and Holly are married and live in a retirement community. This year Jon celebrated his 65th birthday and Holly turned 68 years old. For their ages, both Jon and Holly are in good health. What is the amount of their standard deduction this year?

Which of the following is a true statement?

The itemized deduction for taxes includes all types of state, local, and foreign taxes.

An Introduction to Tax

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Individual Income Tax Overview, Dependents, and Filing Status

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Tax Consequences of Home Ownership

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Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

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