Exam 10: Deductions and Losses: Certain Itemized Deductions

Grace's sole source of income is from a restaurant that she owns and operates as a proprietorship.Any state income tax Grace pays on the business net income must be deducted as a business expense rather than as an itemized deduction.

During the year, Eve (a resident of Billings, Montana) spends three consecutive weeks in Louisville, Kentucky.One week is spent representing the Billings First Christian Church at the national convention, and two weeks are spent vacationing with relatives.One third of Eve's travel expenses will qualify as a charitable deduction.

Marilyn, Ed's daughter who would otherwise qualify as his dependent, filed a joint return with her husband Henry. Ed, who had AGI of $150,000, incurred the following expenses: Ed has a medical expense deduction of:

Liz, who is single, travels frequently on business. Art, Liz's 84-year-old dependent grandfather, lived with Liz until this year when he moved to Granite Falls Nursing Home because he needs daily medical and nursing care. During the year, Liz made the following payments to Granite Falls on behalf of Art: Granite Falls has medical staff in residence. Disregarding the 7.5% floor, how much, if any, of these expenses qualifies as a medical expense deduction by Liz?

Marilyn is employed as an architect.For calendar year 2012, she had AGI of $204,000 and paid the following medical expenses: Peter and Esther would qualify as Marilyn's dependents except that they file a joint return. Marilyn's medical insurance policy does not cover them.Marilyn filed a claim for reimbursement of $6,000 of her own expenses with her insurance company in December 2012 and received the reimbursement in January 2013.What is Marilyn's maximum allowable medical expense deduction for 2012?

In Shelby County, the real property tax year is the calendar year. The real property tax becomes a personal liability of the owner of real property on January 1 in the current real property tax year, 2012. The tax is payable on June 1, 2012. On April 30, 2012, Julio sells his house to Anita for $230,000. On June 1, 2012, Anita pays the entire real estate tax of $7,300 for the year ending December 31, 2012. How much of the property taxes may Julio deduct?

The election to itemize is appropriate when total itemized deductions are less than the standard deduction based on the taxpayer's filing status.

Paul and Patty Black are married and together have AGI of $140,000 in 2012.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.

During the year, Victor spent $300 on bingo games sponsored by his church.If all profits went to the church, Victor has a charitable contribution deduction of $300.

Frank, a widower, had a serious stroke and is no longer capable of caring for himself. He has three sons, all of whom live in different states. Because they are unable to care for Frank in their homes, his sons have placed him in a nursing home equipped to provide medical and nursing care facilities. Total nursing home expenses amount to $45,000 per year. Of this amount, $18,000 is directly attributable to medical and nursing care.Frank's Social Security benefits are used to pay for $12,000 of the nursing home charges. He has no other income. His sons plan to split the remaining medical expenses equally. a. What portion of the nursing home charges is potentially deductible as a medical expense? b. Can you provide Frank's sons with a tax planning idea for maximizing the deduction for his medical expenses?

Any personal expenditures not specifically allowed as itemized deductions by the tax law are nondeductible (unless they are deductible in arriving at AGI).

Ronaldo contributed stock worth $12,000 to the Children's Protective Agency, a qualified charity.He acquired the stock twenty months ago for $6,000.He may deduct $6,000 as a charitable contribution deduction (subject to percentage limitations).

During 2012, Hugh, a self-employed individual, paid the following amounts: What is the maximum amount Hugh can claim as taxes in itemizing deductions from AGI?

John gave $1,000 to a family whose house was destroyed by fire.John may claim a charitable deduction of $1,000 on his tax return for the current year.

Fees for automobile inspections, automobile titles and registration, bridge and highway tolls, parking meter deposits, and postage are not deductible if incurred for personal reasons, but they are deductible as deductions for AGI if incurred as a business expense by a self-employed taxpayer.

In applying the percentage limitations, carryovers of charitable contributions must be claimed after contributions in the current year are considered (FIFO rule).

Jerry pays $5,000 tuition to a parochial school run by his church in order to enable his daughter to attend. This is the amount the school charges all students. Part of the tuition payments can be claimed as a charitable contribution.

In 2012, Dena traveled 545 miles for specialized medical treatment that was not available in her hometown. She paid $80 for meals during the trip, $125 for a hotel room on Tuesday night, and $15 in parking fees. She did not keep records of other out-of-pocket costs for transportation. Dena can include $270 in computing her medical expenses.

Samuel, an individual who has been physically handicapped for a year, paid $15,000 for the installation of wheelchair ramps, support bars, railings, and widening doorways in his personal residence.These improvements increased the value of his personal residence by $4,000.How much of Samuel's expenditures qualify as a medical expense deduction (subject to the 7.5% floor)? Explain.

Sadie mailed a check for $2,200 to a qualified charitable organization on December 31, 2012.The $2,200 contribution is deductible on Sadie's 2012 tax return.