Exam 10: Deductions and Losses: Certain Itemized Deductions

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

Brian, a self-employed individual, pays state income tax payments of: $900 on January 17, 2012 (4th estimated tax payment for 2011) $1,000 on April 16, 2012 (1st estimated tax payment in 2012) $1,000 on June 15, 2012 (2nd estimated tax payment in 2012) $1,000 on September 17, 2012 (3rd estimated tax payment in 2012) $800 on January 15, 2013 (4th estimated tax payment of 2012)

Helen pays nursing home expenses of $3,000 per month for her mother. The monthly charge covers the following items: $1,400 for medical care, $900 for lodging, and $700 for food. Under what circumstances can Helen include the $3,000 per month payment when computing her medical expense deduction for the year? If Helen is not allowed to include the entire payment, how much can she include?

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.

In 2012, Allison drove 800 miles to volunteer in a project sponsored by a qualified charitable organization in Utah.In addition, she spent $250 for meals while away from home.In total, Allison may take a charitable contribution deduction of $112 (800 miles ´ $.14).

The City of Ogden was devastated by a tornado in April 2012, leaving many families in need of food, clothing, shelter, and other necessities. Betty contributed $500 to a family whose home was completely destroyed by the tornado. Jack contributed $700 to the family's church, which gave the money to the family. Discuss the deductibility of these contributions.

Linda, who has AGI of $120,000 in 2012, contributes stock in Mauve Corporation (a publicly traded corporation) to the Salvation Army, a qualified charitable organization.The stock is worth $65,000, and Linda acquired it as an investment four years ago at a cost of $50,000.

Mindy paid an appraiser to determine how much a capital improvement made for medical reasons increased the value of her personal residence.The appraisal fee qualifies as a deductible medical expense.

Herbert is the sole proprietor of a furniture store. He can deduct real property taxes on his store building but he cannot deduct state income taxes related to his net income from the furniture store as a business deduction.

Gambling losses may be deducted to the extent of the taxpayer's gambling winnings.Such losses are subject to the 2% floor for miscellaneous itemized deductions.

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?

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).

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?

The reduced deduction election enables a taxpayer to move from the 30%-of-AGI limitation to the 50%-of-AGI limitation.

George, a sculptor, has an elevator installed in his house to transport heavy materials to his loft studio because he is concerned that he might strain his back by lifting heavy objects. George may deduct the full cost of the elevator as a medical expense.

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.

Jeanne had an accident while hiking on vacation.She sustained nose injuries that required cosmetic surgery.While having the surgery done to restore her appearance, she had additional surgery done to reshape her chin, which was not injured in the accident.The surgery to restore her appearance cost $15,000 and the surgery to reshape her chin cost $4,000.How much of Jeanne's surgical fees will qualify as a deductible medical expense (before application of the 7.5% limitation)?

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.

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.

In 2012, Boris pays a $3,800 premium for high-deductible medical insurance for himself and his family. In addition, he contributes $3,400 to a Health Savings Account. Which of the following statements is true?