Exam 6: Individual Deductions

Unreimbursed employee business expenses, investment expenses, hobby expenses, and certain other expenses are classified as miscellaneous itemized deductions and are deductible only to the extent that their sum exceeds 2% of the taxpayer's AGI.

Which of the following is a true statement?

This year Riley files single and reports AGI of $71,000. Riley paid $1,200 of interest on a qualified education loan. What amounts can Riley deduct for qualifying education interest?

Which of the following costs are deductible as an itemized medical expense?

Jill currently lives in the suburbs and commutes 25 miles to her office in downtown Freeport. She is considering quitting her current job to look for new employment in the downtown area. Which of the following statements best describes how Jill can satisfy the distance test for deducting moving expenses if she accepts a new job in downtown Freeport?

Grace is a single medical student at State University, a qualified educational institution. This year Grace paid university tuition of $12,000. Grace works part-time at the University library, and this year she reports $15,000 of salary and no other items of income or expense. Which of the following is a true statement?

Taxpayers traveling for the primary purpose of receiving essential and deductible medical care may deduct the cost of travel.

Taxpayers are allowed to deduct mortgage interest on up to $1,000,000 of acquisition debt for their qualified residence and on up to $500,000 of home-equity debt.

To qualify as a charitable deduction the donation must be made by cash or by check.

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

This year Tiffanie files as a single taxpayer. Tiffanie received $62,700 of salary and paid $3,200 of qualified educational interest. This year Tiffanie has also paid deductible moving expenses of $2,200 and received $12,000 of alimony. What is Tiffanie's AGI?

Scott is a self-employed plumber and his wife, Emily, is a full-time employee for the University. Emily has health insurance from a qualified plan provided by the University, but Scott has chosen to purchase his own health insurance rather than participate in Emily's plan. Besides paying $5,400 for his health insurance premiums, Scott also pays the following expenses associated with his plumbing business: $\ \text{Plumbing tools and supplies}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\$1,300$ $\ \text{Rent on Scott's plumbing shop}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad6,250$ $\ \text{Transportation between Scott's shop and various job sites}\quad\quad\quad\quad\quad500$ $\ \text{Plumber's uniform}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad50$ $\ \text{Plumbing truck rental}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad7,200$ $\ \text{Self employment tax ( 1 / 2 is employer share)}\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad400$ What is the amount of deductions for AGI that Scott can claim this year (2013)?

The phrase "ordinary and necessary" means that an expense must be appropriate and helpful for generating a profit.

Self employed taxpayers can deduct the cost of health insurance as long as they do not actually participate in their spouses' employer-provided health plan.

Casey currently commutes 35 miles to work in the city. He is considering a new assignment in the suburbs on the other side of the city that would increase his commute considerably. He would like to accept the assignment, but he thinks it might require that he move to the other side of the city. Which of the following is a true statement?

In general, taxpayers are allowed to deduct the fair market value of capital gain property on the date of the donation to a qualified charitable organization.

In 2013, taxpayers may elect to deduct state and local sales taxes instead of deducting state and local income taxes.

The profit motive distinguishes "business" activities from "personal" activities.

Which of the following is a true statement?

The deduction for medical expenses is limited to the amount of unreimbursed qualifying medical expenses paid during the year reduced by five percent of the taxpayer's AGI.