Question 1

Explain why interest expense on investments is limited to net investment income.

Accepted Answer

With no limitation,high-income taxpayers

Question 2

Corner Grocery,Inc. ,a C corporation with high taxable income,donates some of its inventory to the County Food Bank (a charitable organization)which distributes food to the needy.At the time of the contribution,the FMV of the inventory was $20,000,and Corner Grocery's basis was $12,000.Corner Grocery will be allowed a charitable contribution deduction of

Accepted Answer

A) $20,000. 
B) $12,000. 
C) $8,000. 
D) $16,000. 
A) $20,000. 
B) $12,000. 
C) $8,000. 
D) $16,000.

Question 3

Hope is a marketing manager at a local company.Information about her 2017 income and expenses is as follows:
   Compute Hope's taxable income for the year in good form.Show all supporting computations.Hope is single,and she elects to itemize her deductions each year.Assume she does not make any elections regarding the investment interest expense.Also assume that her tax profile was similar in the preceding year.

Accepted Answer

The answer of Hope is a marketing manager at a...

Question 4

Mingming is planning to purchase a new car and plans to borrow $15,000 to help finance the purchase.She has $50,000 of equity in her home so she is planning to take out a home equity loan.Mingming is in the 25% tax bracket.The bank is requiring an 8% interest rate on this loan.The car dealership has just announced a promotion lowering its interest rate on auto loans.In order for the auto dealership loan to be more attractive,the interest rate must be lower than

Accepted Answer

A) 8%. 
B) 6%. 
C) 4%. 
D) 10%. 
A) 8%. 
B) 6%. 
C) 4%. 
D) 10%.

Question 5

Legal fees for drafting a will are generally deductible.

Accepted Answer

A) True 
 B)False

Question 6

In 2017,Sela traveled from her home in Flagstaff to San Francisco to seek specialized medical care.Because she was unable to travel alone,her father accompanied her.Total expenses included:   The total medical expenses deductible before the 10% limitation are

Accepted Answer

A) $1,600. 
B) $2,070. 
C) $2,500. 
D) $2,670. 
A) $1,600. 
B) $2,070. 
C) $2,500. 
D) $2,670.

Question 7

Interest expense incurred in the taxpayer's trade or business is deductible as a for AGI deduction without limitation if the taxpayer materially participates in the business.

Accepted Answer

A) True 
 B)False

Question 8

Leo spent $6,600 to construct an entrance ramp and to widen doorways in his personal residence to make the home accessible for his wife,who is disabled and confined to a wheelchair.The $6,600 expenditure increased the value of the residence by $2,000.How much of the $6,600 is a deductible medical expense (before considering limits based on AGI)?

Accepted Answer

A) $0 
B) $2,000 
C) $4,600 
D) $6,600 
A) $0 
B) $2,000 
C) $4,600 
D) $6,600

Question 9

All of the following are deductible as medical expenses except

Accepted Answer

A) vitamins and health foods that improve a taxpayer's general health. 
B) payments for a vision exam and contact lenses. 
C) payments to a hospital for laboratory fees and X-rays for diagnosis of a medical problem. 
D) cosmetic surgery necessary to correct a deformity arising from a congenital abnormality. 
A) vitamins and health foods that improve a taxpayer's general health. 
B) payments for a vision exam and contact lenses. 
C) payments to a hospital for laboratory fees and X-rays for diagnosis of a medical problem. 
D) cosmetic surgery necessary to correct a deformity arising from a congenital abnormality.

Question 10

Carol contributes a painting to a local museum for display.Her AGI is $60,000.Carol paid $22,000 for the painting in 2006,but its market value at the date of the contribution is $25,000.With no special elections,Carol's deductible contribution this year is

Accepted Answer

A) $ 7,000. 
B) $18,000. 
C) $22,000. 
D) $25,000. 
A) $ 7,000. 
B) $18,000. 
C) $22,000. 
D) $25,000.

Question 11

When both borrowed and owned funds are mingled in the same account,for purposes of categorizing interest expense,a repayment of the debt is allocated first to

Accepted Answer

A) personal expenditures. 
B) trade or business expenditures. 
C) investment expenditures. 
D) passive activity expenditures in real estate. 
A) personal expenditures. 
B) trade or business expenditures. 
C) investment expenditures. 
D) passive activity expenditures in real estate.

Question 12

Tasneem,a single taxpayer has paid the following amounts in 2017:   Tasneem's AGI is $363,500.What is her net itemized deduction allowed?

Accepted Answer

A) $40,000 
B) $38,800 
C) $36,940 
D) $32,730 
A) $40,000 
B) $38,800 
C) $36,940 
D) $32,730

Question 13

Due to stress on the job,taxpayer Fiona began to experience anxiety attacks.Her doctor advised her to engage in some relaxation activities.Fiona enrolled in yoga lessons.The cost of the yoga lessons to alleviate this medical condition is tax deductible.

Accepted Answer

A) True 
 B)False

Question 14

Capital expenditures incurred for medical purposes which permanently improve or better the taxpayer's property are deductible,but only to the extent the cost exceeds the increase in fair market value to the property attributable to the capital expenditure.

Accepted Answer

A) True 
 B)False

Question 15

Medical expenses are deductible as a from AGI deduction to the extent that they exceed 2 percent of the taxpayer's AGI.

Accepted Answer

A) True 
 B)False

Question 16

Discuss the timing of the allowable medical expense deduction.

Accepted Answer

Generally,a deduction for medical expens

Question 17

Taxpayers can deduct the fees paid for investment consulting advice and rental of a safety deposit box to store investment assets as a deduction for AGI.

Accepted Answer

A) True 
 B)False

Question 18

What is the result if a taxpayer makes a contribution to a college or university and in return receives the right to purchase tickets to athletic events?

Accepted Answer

The taxpayer may only deduct 8

Question 19

Investment interest expense is deductible when incurred to purchase tax-exempt securities.

Accepted Answer

A) True 
 B)False

Question 20

In the current year,Julia earns $9,000 in net investment income and incurs $14,000 of investment interest expense.What is the maximum amount of investment interest expense she is allowed to deduct this year?

Accepted Answer

A) $0 
B) $3,000 deductible this year; $11,000 carried forward to next year 
C) $9,000 deductible this year; $5,000 carried forward to next year 
D) $14,000 deductible this year; nothing to be carried forward to next year 
A) $0 
B) $3,000 deductible this year; $11,000 carried forward to next year 
C) $9,000 deductible this year; $5,000 carried forward to next year 
D) $14,000 deductible this year; nothing to be carried forward to next year

Exam 23: Itemized Deductions

Explain why interest expense on investments is limited to net investment income.

Legal fees for drafting a will are generally deductible.

In 2017,Sela traveled from her home in Flagstaff to San Francisco to seek specialized medical care.Because she was unable to travel alone,her father accompanied her.Total expenses included: The total medical expenses deductible before the 10% limitation are

Interest expense incurred in the taxpayer's trade or business is deductible as a for AGI deduction without limitation if the taxpayer materially participates in the business.

All of the following are deductible as medical expenses except

Carol contributes a painting to a local museum for display.Her AGI is $60,000.Carol paid $22,000 for the painting in 2006,but its market value at the date of the contribution is $25,000.With no special elections,Carol's deductible contribution this year is

When both borrowed and owned funds are mingled in the same account,for purposes of categorizing interest expense,a repayment of the debt is allocated first to

Tasneem,a single taxpayer has paid the following amounts in 2017: Tasneem's AGI is $363,500.What is her net itemized deduction allowed?

Due to stress on the job,taxpayer Fiona began to experience anxiety attacks.Her doctor advised her to engage in some relaxation activities.Fiona enrolled in yoga lessons.The cost of the yoga lessons to alleviate this medical condition is tax deductible.

Capital expenditures incurred for medical purposes which permanently improve or better the taxpayer's property are deductible,but only to the extent the cost exceeds the increase in fair market value to the property attributable to the capital expenditure.

Medical expenses are deductible as a from AGI deduction to the extent that they exceed 2 percent of the taxpayer's AGI.

Discuss the timing of the allowable medical expense deduction.

Taxpayers can deduct the fees paid for investment consulting advice and rental of a safety deposit box to store investment assets as a deduction for AGI.

What is the result if a taxpayer makes a contribution to a college or university and in return receives the right to purchase tickets to athletic events?

Investment interest expense is deductible when incurred to purchase tax-exempt securities.

In the current year,Julia earns $9,000 in net investment income and incurs $14,000 of investment interest expense.What is the maximum amount of investment interest expense she is allowed to deduct this year?

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