Exam 5: Itemized Deductions and Other Incentives

Gwen has written acknowledgments for each of the following charitable contributions during the current year: What is Gwen's charitable contribution deduction for the current year?

A theft loss is deductible in the year the theft is discovered, even if the theft occurred in a prior year.

Educational expenses are deductible as a miscellaneous itemized deduction even if the education is required to meet the minimum requirements for the taxpayer's current job.

Melissa took a $1,500 distribution from her educational savings account and used $1,200 to pay for qualified education expenses. Before the distribution, Melissa's account balance was $4,000, of which $1,000 was earnings. Calculate the following:

Margo has $2,200 withheld from her wages for state income taxes during 2016. In March of 2016, she paid $400 in additional taxes for her 2015 state tax return. Her state income tax liability for 2016 is $2,700 and she pays the additional $500 when she files her 2016 state tax return in April of 2017. What amount should Margo deduct as an itemized deduction for state income taxes on her 2016 federal income tax return, assuming she elects to deduct state and local income taxes?

State sales taxes can be deducted in lieu of state income taxes.

Stewart had adjusted gross income of $22,000 in 2016. During the year, he made the following contributions to qualified charities: ​- $7,000 cash ​- 1,000 shares of Able Corporation common stock, acquired in 1980 (cost and fair market value of $5,000) ​ Considering the charitable contribution deduction limitation, what amount can Stewart claim as a deduction for charitable contributions in 2016?

​Lodging for a trip associated with medical care associated with a licensed hospital is not deductible.

Taxpayers are permitted to take an itemized deduction for the lesser of state income taxes paid or state sales taxes paid.​

Which of the following charitable contributions is not tax deductible?

Individual taxpayers may carry forward indefinitely charitable contributions that are not allowed as a deduction in the current year due to the adjusted gross income limitation.

​Alice purchases a new personal auto and finances the purchase through the dealer. The interest of $760 she pays on the car loan during the current tax year is deductible.

For 2016, Betsy and Bob, ages 62 and 68, respectively, are married taxpayers who file a joint tax return with AGI of $50,000. During the year they incurred the following expenses: In addition, their insurance company reimbursed them $3,100 for the above expenses. ​ Using the format below, calculate Betsy and Bob's deduction for medical and dental expenses for 2016.

April and Wilson are married and file a joint tax return. Wilson is a police officer, and in the current tax year he spends $400 on uniforms and $160 for dry cleaning the uniforms. April is in the National Guard and military regulations restrict her from wearing her uniforms when she is off duty. The cost of uniforms for the year was $220 and the cost of dry cleaning them amounted to $80. April was granted a uniform allowance of $180 for the year. She also purchased a pair of standard black shoes to wear while on duty that cost $75. How much may they deduct on Schedule A for special clothing and uniforms, before considering the 2 percent of adjusted gross income limitation? ​

Meade paid $5,000 of state income taxes in 2016. The total actual sales taxes paid during 2016 was $4,500, which did not include $3,000 for the sales taxes paid in 2016 on Meade's new boat. How should Meade treat the taxes paid in his 2016 tax return?

Daniel lives in a state that charges a vehicle registration fee of $50 plus $20 for every $1,000 of value. During the current year, Daniel paid $170 for registration of his automobile. a.​ How much of the vehicle registration fee is deductible as a personal property tax on Schedule A of Daniel's Form 1040? b.Explain your answer.

Harris had adjusted gross income in the current year of $126,000. During the year his personal summer home was almost completely destroyed by a cyclone. Pertinent data with respect to the home follows: Harris was partially insured for his loss and in the current year he received a $113,000 insurance settlement. What is Harris' allowable casualty loss deduction for the current year?

​Richie Rominey purchases a new $4.3 million qualified principal residence in Palo Alto, CA using a mortgage loan of $3 million. Richie's mortgage interest deduction may be limited.

Geoffrey receives $20,000 from a qualified tuition program created by his grandmother. The program had accumulated $6,000 in earnings. He used the full $20,000 to pay for qualified higher education expenses. Calculate the amount of earnings subject to taxation.

Dongkuk uses his holiday bonus to pay his January 2017 mortgage payment in December 2016. The payment would normally be due January 31st. Dongkuk may deduct the interest paid as part of the early mortgage payment.​