Exam 10: Deductions and Losses: Certain Itemized Deductions

Joe, who is in the 33% tax bracket in 2012, expects to retire in 2013 and be in the 25% tax bracket. He plans to donate $50,000 to his church. Because he will not have the cash available until 2013, Joe donates land (long-term capital gain property) with a basis of $10,000 and fair market value of $50,000 to the church in December 2012. He reacquires the land for $50,000 in February 2013. Discuss Joe's tax objectives and all tax issues related to his actions.

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)?

Emily, who lives in Indiana, volunteered to travel to Louisiana in March to work on a home-building project for Habitat for Humanity (a qualified charitable organization).She was in Louisiana for three weeks.She normally makes $500 per week as a carpenter's assistant and plans to deduct $1,500 as a charitable contribution.In addition, she incurred the following costs in connection with the trip: $600 for transportation, $1,200 for lodging, and $400 for meals.What is Emily's deduction associated with this charitable activity?

In 2013, Rhonda received an insurance reimbursement for medical expenses incurred in 2012.She is not required to include the reimbursement in gross income in 2013 if she claimed the standard deduction in 2012.

Leona borrows $100,000 from First National Bank and uses the proceeds to purchase City of Houston bonds.The interest Leona pays on this loan is deductible as investment interest subject to the investment interest limits.

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.

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.

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?

For purposes of computing the deduction for qualified residence interest, a qualified residence includes only the taxpayer's principal residence.

Jack sold a personal residence to Steven and paid points of $3,500 on the loan to help Steven finance the purchase.Jack can deduct the points as interest.

Phillip developed hip problems and was unable to climb the stairs to reach his second-floor bedroom.His physician advised him to add a first-floor bedroom to his home.The cost of constructing the room was $32,000.The increase in the value of the residence as a result of the room addition was determined to be $17,000.In addition, Phillip paid the contractor $5,500 to construct an entrance ramp to his home and $8,500 to widen the hallways to accommodate his wheelchair.Phillip's AGI for the year was $100,000.How much of these expenditures can Phillip deduct as a medical expense?

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

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.

During 2012, Ralph made the following contributions to the University of Oregon (a qualified charitable organization): Ralph acquired the stock in Raptor, Inc., as an investment fourteen months ago at a cost of $42,000. Ralph's AGI for 2012 is $189,000. What is Ralph's charitable contribution deduction for 2012?

A medical expense does not have to relate to a particular ailment to be deductible.

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).

Gerald, a physically handicapped individual, pays $9,000 for the installation of wheelchair ramps, support bars, and railings in his personal residence.These improvements increase the value of his personal residence by $2,000.Only $7,000 of the expenditure qualifies as a medical deduction (subject to the 7.5% floor).

In 2012, Jerry pays $8,000 to become a charter member of Mammoth University's Athletic Council.The membership ensures that Jerry will receive choice seating at all of Mammoth's home basketball games.Also in 2012, Jerry pays $2,200 (the regular retail price) for season tickets for himself and his wife.For these items, how much qualifies as a charitable contribution?

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.

Bill paid $2,500 of medical expenses for his daughter, Marie.Marie is married to John and they file a joint return.Bill can include the $2,500 of expenses when calculating his medical expense deduction.