Exam 6: Individual Deductions

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?

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?

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?

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)?

All investment expenses are itemized deductions.

Which of the following is a true statement?

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

Kaylee is a self-employed investment counselor who also owns a rental property. This year, she collected $85,000 in fees and paid the following expenses: Health insurance premiums (not through an exchange) \ 4,200 Life insurance premiums (whole life) 1,900 Books on investing 200 Repairs of the rental property 450 Advertising for investment clients 1,770 State income taxes 4,300 Self employment tax (1/2 is employer share) 12,704 Kaylee files single with one personal exemption. Calculate her adjusted gross income.

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?

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

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

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

In 2014, personal and dependency exemptions are $6,200 for single taxpayers.

The deduction for charitable contributions is limited to ten percent of the taxpayer's AGI whereas casualty losses on personal assets are only deductible to the extent the losses exceed ten percent of the taxpayer's AGI.

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?

The definition of qualifying expenses is more restrictive for the qualified educational expense deduction than it is for the education loan interest expense deduction.

Mason paid $4,100 of interest on a loan that paid tuition for him to attend a private university this year. How much of this payment can Mason deduct as interest expense on an educational loan if he files single and reports modified AGI of $90,000?

Ned is a head of household with a dependent son, Todd, who is a full-time student. This year Ned made the following expenditures related to Todd's support: Auto insurance premiums \ 1,700 Room and board at Todd's school 2,200 Health insurance premiums (not through an exchange) 600 Travel (to and from school) 350 What amount can Ned include in his itemized deductions?

This fall Millie finally repaid her student loan. She originally borrowed the money to pay tuition several years ago when she attended at State University (a qualified educational institution). This year Millie paid a total of $2,400 of interest on the loan. If Millie files single and reports $70,000 of income and no other items of income or expense how much of the interest can she deduct?

An individual who is eligible to be claimed as a dependent on another's return and has $1,000 of earned income may claim a standard deduction of $1,350.