Question 1

Dongkuk uses his holiday bonus to pay his January 2020 mortgage payment in December 2019. The payment would normally be due January 31st. Dongkuk may deduct the interest paid as part of the early mortgage payment.

Accepted Answer

A) True 
 B)False  False

Question 2

Christine saw a television advertisement asking for donations of used vehicles to a charitable foundation and decided to donate her old car. Which of the following statements is correct?

Accepted Answer

A)  She can take a tax deduction large enough on an after-tax basis to equal the amount she would have received if she sold the car directly.
B)  She can take a deduction greater than the amount for which the charity actually sells the vehicle.
C)  She can claim an estimated value for the auto if the charity uses it rather than selling it.
D)  The charity is not required to provide her with any information about what they do with the auto. C

Question 3

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

Accepted Answer

A) True 
 B)False  False

Question 4

A taxpayer must make contributions to a regular or Roth IRA prior to the end of the year in order to claim the deduction for that year.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is correct?

Accepted Answer

A)  Contributions to SEP plans by self-employed taxpayers are generally limited to the lesser of 15 percent of their net earned income (before the SEP deduction)  or $45,000.
B)  The contribution limits for SEPs are the lesser of 25 percent of net self-employment income after the deduction for the contribution to the SEP or $56,000 for a self-employed taxpayer.
C)  Employees may elect to make annual contributions to 401(k)  plans up to the lesser of 15 percent of their net earned income (before the 401(k)  deduction)  or $55,000.
D)  The contribution limits for SEPs are a maximum of $19,000 ($25,000 for taxpayers 50 or older) .

Question 6

For 2019, 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: $$\begin{array} { l r } 
\text { Medical insurance premiums } & \$ 3,200 \
\text { Hospital bills (knee replacement for Bob) } & \$ 4,400 \
\text { Hospital bills (face lift for Betsy) } & \$ 2,600 \
\text { Doctor bills } & \$ 750 \
\text { Dentist bills } & \$ 250 \
\text { Prescription eyeglasses } & \$ 380 \
\text { Acupuncture treatments (for Bob's knee pain prior to his operation) } & \$ 300
\end{array}$$ 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 2019.  ?

Accepted Answer

The answer of For 2019, Betsy and Bob, ages 62...

Question 7

During the current year, Seth, a self-employed individual, paid the following taxes: $$\begin{array} { l r } 
\text { Federal income tax } & \$ 15,000 \
\text { State income tax } & \$ 8,500 \
\text { Real estate taxes on land in South America (held as an investment) } & \$ 1,000 \
\text { State sal es taxes } & 300 \
\text { Personal property taxes based upon value } & \$ 1,600 \
\text { Federal self-employment tax } & \$ 800
\end{array}$$ What amount can Seth claim as an itemized deduction for taxes paid during the current year?

Accepted Answer

A)  $10,100
B)  $11,400
C)  $9,500
D)  $10,000
E)  None of these

Question 8

Subject to the annual dollar limitation and the earned income limitation, deductible IRA contributions are allowed for all taxpayers who do not participate in a qualified retirement plan.

Accepted Answer

A) True 
 B)False

Question 9

Brett and Lisa file taxes under the married filing jointly status. Lisa is a sales manager for an auto parts company and Brett takes care of their 3 children. In 2019, Lisa receives a promotion associated with a move to a new division located over 500 miles from their existing home. The cost to move their household items is $8,700. Lisa's employer reimburses her for $3,000 of those costs and also pays $2,100 for airfare for the entire family to fly to the new destination. Lisa's moving expenses deduction for 2019 is:

Accepted Answer

A)  $0
B)  $8,700
C)  $5,700
D)  $3,600
E)  None of these

Question 10

The cost of over-the-counter aspirin and decongestants is a deductible medical expense even though they are nonprescription drugs.

Accepted Answer

A) True 
 B)False

Question 11

Frank is a resident of a state that imposes a tax on income. The following information pertaining to Frank's state income taxes is available: $\begin{array}{lr}
\text { State income taxes withheld in } 2019 & \$ 3,500 \
\text { Refund of } 2018 \text { tax received in } 2019 & \$ 400 \
\text { Deficiency assessed and paid in } 2019 \text { for } 2017: & \
\text { State tax } & \$ 600 \
\text { Interest } & \$ 100
\end{array}$
 What amount should Frank use as state and local income taxes in calculating itemized deductions for his 2019 Federal tax return, assuming he deducts state and local income taxes?

Accepted Answer

A)  $3,500
B)  $3,700
C)  $4,100
D)  $4,200
E)  None of these

Question 12

In 2019, which of the following miscellaneous deductions are not subject to the 2 percent of adjusted gross income limitation and remain deductible?

Accepted Answer

A)  Unreimbursed employee business expenses
B)  Investment expenses
C)  Unrecovered annuity costs at death
D)  Union dues
E)  None of these

Question 13

Dr. Wheeler donates her time and services to Doctors with No Limits, a qualified charity. Dr. Wheeler can take a tax deduction for the $3,400 market value of her time donated.

Accepted Answer

A) True 
 B)False

Question 14

Moe has a law practice and earns $322,000 which he reports on his Schedule C. His wife, Mindy, works part-time at Wal-Mart and earns $8,300. Mindy does not receive any medical benefits through Wal-Mart. Their 29-year-old daughter, Michelle, who is not a dependent, is working toward earning her Master's degree.
Moe and Mindy pay the following amounts: $$\begin{array} { l r } 
\text { Health insurance for Moe and Mindy } & \$ 8,100 \
\text { Dental insurance for Moe and Mindy } & 600 \
\text { Vision care insurance for Moe and Mindy } & 425 \
\text { Health insurance for their daughter } & 3,620 \
\text { Long-term care insurance for Moe who is 54 years old } & 1,680
\end{array}$$ How much may Moe and Mindy claim on their tax return as a self-employed health insurance deduction?

Accepted Answer

The answer of Moe has a law practice and earns...

Question 15

Stewart had adjusted gross income of $22,000 in 2019. During the year, he made the following contributions to qualified charities: - $7,000 cash
- 1,000 shares of Able Corporation common stock, acquired in 2010 (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 2019?

Accepted Answer

A)  $5,000
B)  $7,000
C)  $11,000
D)  $12,000
E)  None of these

Question 16

To calculate the amount of state and local income taxes which may be deducted as an itemized deduction, state income taxes paid during the year must be reduced by state income tax refunds received during the year.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following types of interest is not deductible?

Accepted Answer

A)  Qualified mortgage interest on residence
B)  Qualified mortgage interest on second residence
C)  Credit card interest
D)  All of the above
E)  None of these

Question 18

Perry Mayson, a single taxpayer, graduated law school last year with quite a bit of qualified student loan debt and ends up paying $4,300 in interest on the loan in the current tax year. Fortunately, Perry is well compensated and earns adjusted gross income of $90,000 during the current year. Perry may deduct his student loan interest in the current year.

Accepted Answer

A) True 
 B)False

Question 19

Jerry and Ann paid the following amounts during the current year: $\begin{array}{llcc}
  \text {  Interest on automobile loan} &\$1,500\
 \text {Interest on bank loan (proceeds were used to purchase municipal bonds)  } &\$5,000\
 \text { Qualified home mortgage interest } &\$3,150\
\end{array}$
 What is the maximum amount they can use as interest expense in calculating itemized deductions for the current year?

Accepted Answer

A)  $6,500
B)  $3,150
C)  $4,650
D)  $8,150
E)  None of these

Question 20

Bill has a mortgage loan on his personal residence. He decides to pay 18 months of interest ($2,000 per month or $36,000 total) in advance on October 1, 2019. How much of the advance interest payment can he deduct in 2019?

Accepted Answer

A)  $6,000
B)  $24,000
C)  $36,000
D)  Mortgage interest is not deductible.
E)  If a taxpayer makes an advance payment, he may not deduct any interest.

Exam 5: Deductions for and From AGI

Dongkuk uses his holiday bonus to pay his January 2020 mortgage payment in December 2019. The payment would normally be due January 31st. Dongkuk may deduct the interest paid as part of the early mortgage payment.

Christine saw a television advertisement asking for donations of used vehicles to a charitable foundation and decided to donate her old car. Which of the following statements is correct?

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

A taxpayer must make contributions to a regular or Roth IRA prior to the end of the year in order to claim the deduction for that year.

Which of the following statements is correct?

Subject to the annual dollar limitation and the earned income limitation, deductible IRA contributions are allowed for all taxpayers who do not participate in a qualified retirement plan.

The cost of over-the-counter aspirin and decongestants is a deductible medical expense even though they are nonprescription drugs.

In 2019, which of the following miscellaneous deductions are not subject to the 2 percent of adjusted gross income limitation and remain deductible?

Dr. Wheeler donates her time and services to Doctors with No Limits, a qualified charity. Dr. Wheeler can take a tax deduction for the $3,400 market value of her time donated.

To calculate the amount of state and local income taxes which may be deducted as an itemized deduction, state income taxes paid during the year must be reduced by state income tax refunds received during the year.

Which of the following types of interest is not deductible?

Bill has a mortgage loan on his personal residence. He decides to pay 18 months of interest ($2,000 per month or $36,000 total) in advance on October 1, 2019. How much of the advance interest payment can he deduct in 2019?