Exam 6: Individual Deductions

Which of the following is a true statement?

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. This year the only significant expense that they incurred was an unreimbursed medical expense of $3,200. If Jon and Holly together have AGI of $42,000, what is the amount of their standard deduction this year?

To be deductible, business expenses must be directly related to a business activity.

Which of the following is a true statement?

Bruce is employed as an executive and his wife, Marie, is a self-employed realtor. Besides Bruce's salary, Bruce and Marie own a warehouse that they rent to a local business for storage. This year they paid $1,250 for electric service in the warehouse. Marie also paid self-employment tax of $6,200 and Bruce had $7,000 of Social Security taxes withheld from his pay. Marie paid $45 fee to rent a safe deposit box to store records associated with her realty operation. Which of the following is a true statement?

Grace is employed as the manager of a sandwich shop. This year she earned a salary of $45,000 and incurred the following expenses associated with her employment: $\ \text{Subscriptions to food publications} \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\$300$ $\ \text{Cooking class ("How to make better subs")}\quad\quad\quad\quad\quad\quad250$ $\ \text{Transportation between Grace's home and the shop}\quad\quad\quad500$ What amount of miscellaneous itemized deductions can Grace include with her other allowable itemized deductions?

Which of the following is a true statement?

This fall Manfred enrolled in the law school at State University (a qualified educational institution) and paid $6,200 in tuition. Until his enrollment Manfred worked as a stock broker and this year he reports $70,000 in wages. If Manfred files single and reports no other items of income or expense how much of the tuition can he deduct as a business expense?

To deduct a moving expense, the taxpayer must be employed or self employed for a specific amount of time after the move.

When taxpayers donate cash and capital gain property to a public charity, the AGI percentage limitation is applied in the following order:

This year Darcy made the following charitable contributions: State University IBM stock \ 15,000 \ 10,500 Salvation Army clothes 2,500 500 State Art Museum painting 5,000 45,000 City Hospital cash 8,000 Determine the maximum amount of charitable deduction for Darcy's contribution of the painting if her AGI is $80,000 this year. You may assume that both the stock and painting have been owned for 10 years.

Lewis is an unmarried law student at State University, a qualified educational institution. Last year Lewis borrowed $30,000 and used the proceeds to pay his university tuition. This year Lewis paid $1,500 of interest on the loan. Which of the following is a true statement if Lewis reports $40,000 of salary and no other items of income or expense?

Erika (age 67) was hospitalized with injuries from an auto accident this year. She incurred the following expenses from the accident: $\ \text{Hospital charges}\quad\quad\quad\quad\$ 3,280$ $\ \text{Prescription medicine}\quad\quad\quad510$ $\ \text{Doctor's fees}\quad\quad\quad\quad\quad\quad1,240$ In addition, Erika's auto was completely destroyed in the accident. She bought the car several years ago for $18,000 and it was worth $4,700 at the time of the accident. What are Erika's itemized deductions this year if she was uninsured and her AGI is $40,000?

Han is a self-employed carpenter and his wife, Christine, works full-time as a grade school teacher. Han paid $525 for carpentry tools and supplies, and Christine paid $3,600 as her share of health insurance premiums for Han and herself in a qualified plan provided by the school district (not through an exchange). Which of the following is a true statement?

This fall Marsha and Jeff paid $5,000 for their son Josh's tuition and fees at State University (a qualified education institution). They also paid $1,000 for Josh's books. How much of these two payments can Marsha and Jeff deduct this year, assuming Josh is their dependent, their modified AGI is $135,000, and the 2013 rules apply for purposes of the qualified education expense deduction?

Glenn is an accountant who races stock cars as a hobby. This year Glenn was paid a salary of $80,000 from his employer and won $2,000 in various races. What is the effect of the racing activities on Glenn's taxable income if Glenn has also incurred $4,200 of hobby expenses this year? Assume that Glenn itemizes his deductions but has no other miscellaneous itemized deductions.

All business expense deductions are claimed above the line.

Opal fell on the ice and injured her hip this winter. As a result she paid $3,000 for a visit to the hospital emergency room and $750 for follow-up visits with her doctor. While she recuperated, Opal paid $500 for prescription medicine and $600 to a therapist for rehabilitation. Insurance reimbursed Opal $1,200 for these expenses. What is the amount of Opal's qualifying medical expense?

Rochelle, a single taxpayer (age 47), has an AGI of $270,000. This year, she paid medical expenses of $30,000, state income taxes of $4,000, mortgage interest of $10,600, and charitable contributions of $6,000. What would be the amount of her total itemized deductions she may claim on her tax return?

Karin and Chad (ages 30 and 31, respectively) are married and together have $110,000 of AGI. This year they have recorded the following expenses: Home mortgage interest \ 6,640 Real estate taxes 5,400 State income taxes paid 6,300 Medical expenses (unreimbursed) 1,800 Employee business expenses (unreimbursed) 450 Charitable contributions (cash to their church) 760 Karin and Chad will file married joint with two personal exemptions. Calculate their taxable income.