Exam 6: Individual Deductions

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: Subscriptions to food publications $\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\$300$ Cooking class ("How to make better subs") $\quad\quad\quad\quad\quad\quad\quad\quad250$ Transportation between Grace's home and the shop $\quad\quad\quad\quad\quad\quad500$ What amount of miscellaneous itemized deductions can Grace include with her other allowable itemized deductions?

Which of the following is a true statement?

An individual who forfeits a penalty for prematurely withdrawing a certificate of deposit (CD) is allowed to net the penalty against the interest income from the CD.

This fall, Josh paid $5,000 for his tuition and fees at State University (a qualified education institution). Assume that Josh is Marsha and Jeff's son and that Marsha and Jeff claim Josh as a dependent. Marsha and Jeff's modified AGI is $100,000. How much of Josh's $5,000 tuition and fees payments can Marsha and Jeff deduct this year (assume the 2013 rules apply for purposes of the qualified education expense deduction)?

Self employed taxpayers can choose between claiming a deduction or a credit for the employer portion of self employment taxes paid.

Which of the following is a true statement?

Constance currently commutes 25 miles from her house to her existing part time job in the suburbs. Next week she begins a new full time job in another state, and this job location is 100 miles from her existing home. Because of the additional distance Constance is selling her house, and she has rented an apartment that is only 2 miles from her new job. Constance expects to pay the following moving expenses. Cost of searching for an apartment $\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\$325$ Transportation - auto (computed using the mileage rate of 23.5 cents per mile, rounded) 24 Cost of van to move furniture and possessions 810 Meals while en route 25 Determine if this move qualifies for a moving expense deduction and calculate the amount (if any) of the deduction.

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

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.

Qualified education expenses for purposes of the deduction of interest on educational loans are expenses paid for the education of the taxpayer, the taxpayer's spouse, or a taxpayer's dependent to attend a post-secondary institution of higher education.

Frieda is 67 years old and deaf. If Frieda files as a head of household, what amount of standard deduction can she claim in 2014?

Last year Henry borrowed $15,000 to help pay for his dependent daughter's college tuition. This year Henry paid $2,800 of interest on the loan. How much, if any, interest can Henry deduct if he files single with AGI of $72,500?

Simone donated a landscape painting (tangible capital gain property) to a library, a public charity. She purchased the painting five years ago for $50,000, and on the date of the gift, it had a fair market value of $200,000. What is her maximum charitable contribution deduction for the year if her AGI is $300,000 (before considering the itemized deduction phase-out)?

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?

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.

Jim was in an auto accident this year. Jim paid $2,450 to repair his car after the accident and his insurance only reimbursed him $400. Jim bought his car several years ago for $1,500. What is the amount of casualty loss from this accident before Jim applies any casualty loss floor limitations?

All business expense deductions are claimed above the line.

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?

Margaret Lindley paid $15,000 of interest on her $300,000 acquisition debt for her home (fair market value of $500,000), $4,000 of interest on her $30,000 home-equity loan, $1,000 of credit card interest, and $3,000 of margin interest for the purchase of stock. Assume that Margaret Lindley has $10,000 of interest income this year and no investment expenses. How much of the interest expense may she deduct this year?