Exam 7: Itemized Deductions

Ted pays $2,100 interest on his automobile loan,$120 interest on a loan to purchase a computer for personal use,$630 interest on credit cards,and $1,100 investment interest expense.Ted has net investment income of $850.Ted's deductible interest is

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

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

Phoebe's AGI for the current year is $120,000.Included in this AGI is $100,000 salary and $20,000 of interest income.In earning the investment income,Phoebe paid investment interest expense of $30,000.She also incurred the following expenditures subject to the 2% of AGI limitation: Investment expenses: What is Phoebe's investment interest expense deduction for the year?

Patrick and Belinda have a twelve-year-old son,Aidan,who is autistic.Patrick and Belinda pay tuition of $20,000 annually for Aidan to attend a school for autistic children.What tax issues should be considered? What additional information would you need?

While points paid to purchase a residence are deductible as interest in the period paid,points associated with the refinancing of a residence must be amortized and deducted over the life of the loan.

In 2016,Mario earned $9,000 in net investment income and incurred $14,000 of investment interest expense.Mario paid off the loan in early 2017,so he only paid $2,000 of investment interest expense in 2017.He earned $10,000 of net investment income in 2017.How much investment interest expense can Mario deduct in 2017?

Expenditures for a weight reduction program are deductible if recommended by a physician to treat a specific medical condition such as hypertension caused by excess weight.

Matt paid the following taxes this year: What is the maximum amount Matt can deduct as an itemized deduction on his tax return?

In order for a taxpayer to deduct a medical expense,the amount must be paid to a licensed physician.

A charitable contribution in excess of the deduction limit for one taxable year can be carried forward five years.

An accrual-basis corporation can only deduct contributions made by year-end.

Christa has made a $25,000 pledge to the American Red Cross (a public charity).Christa expects AGI of $200,000 this year.Which of the following assets should she donate?

Christopher,a cash-basis taxpayer,borrows $1,000 from ABC Bank by issuing a 3-month note on December 1,2017.Christopher receives $940 but must repay $1,000 on the due date.The amount of interest expense deductible in 2017 is $20.

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

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.

Claudia refinances her home mortgage on June 1 of the current year.She obtains a 30-year mortgage at 5%.As part of the refinancing,she pays points of $3,600 (a customary practice in her location).What amount,if any,of the points are deductible?

On July 31 of the current year,Marjorie borrows $120,000 to purchase a new fishing boat.The loan is secured by her personal residence.On the date of the loan,the outstanding balance on the original debt incurred to purchase the residence is $300,000 and the FMV of the home is $450,000.What is the total amount of debt on which Marjorie can deduct interest in the current year?

A taxpayer can deduct a reasonable amount for small out-of-pocket (i.e.cash) donations.

During 2017,Richard and Denisa,who are married and have two dependent children,have the following income and losses: Compute Richard and Denisa's taxable income for the year.(Show all calculations in good form.)