Exam 10: Deductions and Losses: Certain Itemized Deductions

Paul and Patty Black (both are age 66) are married and together have AGI of $140,000 in 2015.They have two dependents and file a joint return.During the year,they paid $8,000 for medical insurance,$15,000 in doctor bills and hospital expenses,and $1,000 for prescribed medicine and drugs. a.In December 2015,the Blacks received an insurance reimbursement of $3,500 for hospitalization expenses.Determine the deduction allowable for medical expenses paid during the year. b.Assume instead that the Blacks received the $3,500 insurance reimbursement in February 2016.Determine the deduction allowable for medical expenses incurred in 2015. c.Assume that the Blacks received the $3,500 insurance reimbursement in February 2016.Discuss whether the reimbursement will be included in their gross income for 2016.

Leona borrows $100,000 from First National Bank and uses the proceeds to purchase City of Houston bonds.The interest Leona pays on this loan is deductible as investment interest subject to the investment interest limits.

Bill paid $2,500 of medical expenses for his daughter,Marie.Marie is married to John and they file a joint return.Bill can include the $2,500 of expenses when calculating his medical expense deduction.

In 2015,Dena traveled 600 miles for specialized medical treatment that was not available in her hometown.She paid $90 for meals during the trip,$145 for a hotel room for one night,and $15 in parking fees.She did not keep records of other out-of-pocket costs for transportation.Dena can include $203 in computing her medical expenses.

Jim's employer pays half of the premiums on a group medical insurance plan covering all employees,and employees pay the other half.Jim can exclude the half of the premium paid by his employer from his gross income and may include the half he pays in determining his medical expense deduction.

Al contributed a painting to the Metropolitan Art Museum of St.Louis,Missouri.The painting,purchased six years ago,was worth $40,000 when donated,and Al's basis was $20,000.If this painting is immediately sold by the museum and the proceeds are placed in the general fund,Al's charitable contribution deduction is $20,000 (subject to percentage limitations).