Exam 7: Itemized Deductions

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.

Nina includes the following expenses in her miscellaneous itemized deductions before application of the 2% of AGI floor: Nina's AGI is $100,000.How much of the above-noted expenses will reduce her net investment income?

Clayton contributes land to the American Red Cross for use as a future site for a new building.His AGI is $50,000.Clayton paid $20,000 for the land eight months ago but its market value at the date of contribution is $25,000.With no special elections,Clayton's deductible contribution this year is

All of the following payments for medical items are deductible with the exception of the payment for

Hugh contributes a painting to a local museum for display.His AGI is $35,000.Hugh paid $16,000 for the painting in 2000,but its market value at the date of the contribution is $22,000.If Hugh makes the election to maximize the current year deduction,his deductible contribution for this year will be

Explain when the cost of living in an institution other than a hospital may be deductible.

Taxpayers may elect to include net capital gain as part of investment income.

In general,the deductibility of interest depends on the purpose for which the indebtedness is incurred.

All of the following statements are true except

Doug pays a county personal property tax on his automobile of $1,500.The $1,500 includes $800 based on the weight of the car and $700 based on the value of the car.How much of the tax can Doug deduct on his tax return?

Discuss the timing of the allowable medical expense deduction.

Erin's records reflect the following information: 1.Paid $200 dues to a fraternal organization (such as the Elks Club). 2.Donated stock having a fair market value of $3,500 to a qualified charitable organization.She purchased the stock 2 years earlier for $3,000. 3.Paid $1,600 cash to qualified public charitable organizations. Erin's adjusted gross income for this year was $50,000.What is the amount of her charitable contribution deduction for the year?

Leslie,who is single,finished graduate school this year and began repaying her student loan.The proceeds of the loan were used to pay her qualified higher education expenses.She has not received any type of educational assistance or scholarships.The amount of interest paid during the year amounted to $3,800.What is the amount and classification of her student loan interest education deduction if her modified AGI is $40,000?

All casualty loss deductions,regardless of the type of asset,are allowed as itemized deductions.

Carl purchased a machine for use in his trade or business two years ago for $30,000.During the current year,Carl donates the machine to the local community college.At the time of the contribution,the machine's adjusted basis is $10,000 and its FMV is $15,000.Carl's AGI for the year is $48,000.What is the amount of his charitable contribution deduction?

Marcia,who is single,finished graduate school this year and began repaying her student loan.The proceeds of the loan were used to pay her qualified higher education expenses.She has not received any type of educational assistance or scholarships.The amount of interest paid during the year amounted to $3,000.What is the amount and classification of her student loan interest deduction if her AGI is $68,000?

Alan,who is a security officer,is shot while on the job.As a result,Alan suffers from a chronic leg injury and must use a wheelchair and undergo therapy to regain and retain strength.Alan's physician recommends that he install a whirlpool bath in his home for therapy.During the year,Alan makes the following expenditures: A professional appraiser tells Alan that the whirlpool has increased the value of his home by $1,000.Alan's deductible medical expenses (before considering limitations based on AGI) will be

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

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

Linda had a swimming pool constructed at her house.Her physician advised and prescribed to her that the pool would slow the effects of her degenerative disease.The pool was not suitable for recreational use.Prior to the construction of the pool,the fair market value of her house was $172,000.After the construction of the pool,the appraised fair market value of the house was $181,000.The cost of the pool was $13,000.What is the amount of Linda's qualified medical expense (before considering limits based on AGI)?