Exam 10: Deductions and Losses: Certain Itemized Deductions

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:

In 2005, Ross, who is single, purchased a personal residence for $170,000 and took out a mortgage of $100,000 on the property. In May of the current year, when the residence had a fair market value of $220,000 and Ross owed $70,000 on the mortgage, he took out a home equity loan for $110,000. He used the funds to purchase a BMW for himself and a Lexus SUV for his wife. For both vehicles, 100% of the use is for personal activities. What is the maximum amount on which Ross can deduct home equity interest?

Diego, who is single and lives alone, is physically handicapped as a result of a diving accident. In order to live independently, he modifies his personal residence at a cost of $20,000. The modifications included widening halls and doorways for a wheelchair, installing support bars in the bathroom and kitchen, installing a stairway lift, and rewiring so he could reach electrical outlets and appliances. Diego pays $200 for an appraisal that places the value of the residence at $124,000 before the improvements and $129,000 after. As a result of the operation of the stairway lift, Diego experienced an increase of $475 in his utility bills for the current year. Disregarding percentage limitations, how much of the above expenditures qualify as medical expense deductions?

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?

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?

Rosie owned stock in Acme Corporation that she donated to a university (a qualified charitable organization) on September 6, 2012. What is the amount of Rosie's charitable contribution deduction assuming that she had purchased the stock for $20,100 on October 22, 2011, and the stock had a value of $28,200 when she made the donation?

Warren sold his personal residence to Alicia on July 1, 2012.He had paid $4,200 in real property taxes on March 1, 2012, the due date for property taxes for 2012.Warren must increase the amount realized for his property by the portion of the $4,200 allocable to Alicia.

A taxpayer pays points to obtain financing to purchase a personal residence.At the election of the taxpayer, the points can be deducted as interest expense for the year paid.

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?

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.

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 2012, Kathy, who is self-employed, paid $650 per month for an HSA contract that provides medical insurance coverage with a $3,000 deductible.The plan covers Kathy, her husband, and their three children.Of the $650 monthly fee, $300 was for the high-deductible policy, and $350 was deposited into an HSA.How much of the amount paid for the high-deductible policy can Kathy deduct as a deduction for AGI?

In 2012, Roseann makes the following donations to qualified charitable organizations: The ABC stock and the inventory were given to Roseann's church, and the comic book collection was given to the United Way. Both donees promptly sold the property for the stated fair market value. Disregarding percentage limitations, Roseann's charitable contribution deduction for 2012 is:

Ron and Tom are equal owners in Robin Corporation. On July 1, 2012, each loans the corporation $20,000 at annual interest of 10%. Ron and Tom are brothers. Both shareholders are on the cash method of accounting, while Robin Corporation is on the accrual method. All parties use the calendar year for tax purposes. On June 30, 2013, Robin repays the loans of $40,000 together with the specified interest of $4,000. How much of the interest can Robin Corporation deduct in 2012?

Contributions to public charities in excess of 50% of AGI may be carried back 3 years or forward for up to 5 years.

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.

During 2012, Nancy paid the following taxes: Nancy sold her personal residence on June 30, 2012, under an agreement in which the real estate taxes were not prorated between the buyer and the seller.What amount qualifies as a deduction from AGI for 2012 for Nancy?

Tom is advised by his family physician that he needs back surgery to correct a problem from his last back surgery. Since Tom is in a wheel chair, he needs his wife, Jean, to accompany him on his trip to Rochester, Minnesota, for in-patient treatment at the Mayo Clinic, which specializes in this type of surgery. Tom incurred the following costs: Compute Tom's medical expenses for the trip (subject to the 7.5% floor).

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.

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