Exam 10: Deductions and Losses: Certain Itemized Deductions

In the year of her death, Maria made significant charitable contributions of capital gain property.In fact, the amount of the contributions exceeds 30% of her AGI.Maria's executor can elect to deduct charitable contributions of up to 50% of Maria's AGI on Maria's final income tax return.

Interest paid or accrued during the tax year on aggregate acquisition indebtedness of $2 million or less ($1 million or less for married persons filing separate returns) is deductible as qualified residence interest.

Harry and Sally were divorced three years ago.In July of the current year, their son, Joe, broke his arm falling out of a tree.Joe lives with Sally and Sally claims him as a dependent on her tax return. Harry paid for the medical expenses related to Joe's injury.Can Harry claim the medical expenses he paid for Joe on his tax return?

In April 2012, Bertie, a calendar year cash basis taxpayer, had to pay the state of Michigan additional income tax for 2011.Even though it relates to 2011, for Federal income tax purposes the payment qualifies as a tax deduction for tax year 2012.

In 2012 Michelle, single, paid $2,500 interest on a qualified student loan.Her MAGI was $70,000.She may deduct the $2,500 of interest as a deduction for AGI.

Letha incurred a $1,600 prepayment penalty to a lending institution because she paid off the mortgage on her home early.The $1,600 is deductible as interest expense.

Pedro's child attends a school operated by the church the family attends.Pedro made a donation of $1,000 to the church in lieu of the normal registration fee of $200.In addition, Pedro paid the regular tuition of $6,000 to the school.Based on this information, what is Pedro's charitable contribution?

For all of 2012, Aaron (a calendar year taxpayer) allowed the City Men's Shelter, a qualified charitable organization, to use a building he owns rent-free.The building normally rents for $12,000 a year.Aaron must report $12,000 of rent income and will be allowed a charitable contribution deduction for 2012 of $12,000.

Roger is employed as an actuary.For calendar year 2012, he had AGI of $130,000 and paid the following medical expenses: Derrick and Jane would qualify as Roger's dependents except that they file a joint return.Roger's medical insurance policy does not cover them.Roger filed a claim for $4,800 of his own expenses with his insurance company in November 2012 and received the reimbursement in January 2013.What is Roger's maximum allowable medical expense deduction for 2012?

Joe, a cash basis taxpayer, took out a 12-month business loan on December 1, 2012. He prepaid all $3,600 of the interest on the loan on December 1, 2012. Joe can deduct all $3,600 of the prepaid interest in 2012.

Brad, who uses the cash method of accounting, lives in a state that imposes an income tax (including withholding from wages).On April 14, 2012, he files his state return for 2011, paying an additional $600 in state income taxes.During 2012, his withholdings for state income tax purposes amount to $3,550.On April 13, 2013, he files his state return for 2012 claiming a refund of $800.Brad receives the refund on June 3, 2013.If he itemizes deductions, how much may Brad claim as a deduction for state income taxes on his Federal income tax return for calendar year 2012 (filed in April 2013)?

For purposes of computing the deduction for qualified residence interest, a qualified residence includes the taxpayer's principal residence and two other residences of the taxpayer or spouse.

Taxes assessed for local benefits, such as a new sidewalk, are not deductible as real property taxes.

In order to dissuade his pastor from resigning and taking a position with a larger church, Michael, an ardent leader of the congregation, gives the pastor a new car. The cost of the car is deductible by Michael as a charitable contribution.

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).

Which of the following items would be an itemized deduction on Schedule A of Form 1040 subject to the 2%-of-AGI floor?

Margaret, who is self-employed, paid $6,000 for medical insurance coverage.She can include the $6,000 when calculating her medical expense deduction.

Phyllis, a calendar year cash basis taxpayer who itemized deductions, overpaid her 2011 state income tax and is entitled to a refund of $400. Phyllis chooses to apply the $400 overpayment toward her state income taxes for 2012. She is required to recognize that amount as income in 2012.

Sergio was required by the city to pay $2,000 for the cost of new curbing installed by the city in front of his personal residence. The new curbing was installed throughout Sergio's neighborhood as part of a street upgrade project. Sergio may not deduct $2,000 as a tax, but he may add the $2,000 to the basis of his property.

Shirley pays FICA (employer's share) on the wages she pays her maid to clean and maintain Shirley's personal residence. The FICA payment is not deductible as an itemized deduction.