Question 1

Matthew purchases a new principal residence in the current year and pays points of $2,000 to obtain a mortgage loan.What is the proper tax treatment for the points paid?

Accepted Answer

A) The points are a nondeductible personal expense. 
B) The points must be amortized over the life of the loan. 
C) The points are fully deductible in the current year. 
D) The points must be capitalized into the cost of the residence. 
E) The points must be amortized over 5 years.

Question 2

Meade paid $5,000 of state income taxes in 2018.The total actual sales taxes paid during 2018 was $4,500, which did not include $3,000 for the sales taxes paid in 2018 on Meade's new boat.How should Meade treat the taxes paid in his 2018 tax return?

Accepted Answer

The answer of Meade paid $5,000 of state income taxes...

Question 3

What is the maximum amount a 30-year-old taxpayer and a 35-year-old spouse can put into a Traditional or Roth IRA for 2018, assuming they earn $50,000 in total and are not covered by pension plans?

Accepted Answer

The answer of What is the maximum amount a 30-year-old...

Question 4

During the current year, Mary paid the following expenses:? $$\begin{array} { l l } 
\text { Prescription drugs } & \$ 490 \
\text { Aspirin and over the counter cold capsules } & \$ 130 \
\text { Hospital and doctors } & \$ 700 \
\text { Life insurance } & \$ 260
\end{array}$$ What is the total amount of medical expenses (before considering the limitation based on adjusted gross income)that would enter into the calculation of itemized deductions on Mary's current year income tax return?

Accepted Answer

A) $700 
B) $1,190 
C) $1,450 
D) $1,580 
E) None of the above

Question 5

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 2018, 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 2018 is:

Accepted Answer

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

Question 6

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 7

Mike and Rose are married and file jointly.Mike earns $45,000 from wages and Rose reports $450 on her Schedule C as an artist.Since Mike's work does not offer health insurance, Rose pays the following health insurance premiums from her business account: $\begin{array}{llcc}
  \text { Family heal th insurance  } & \$9,500 \
 \text { Family dental insurance } &1,000\
\end{array}$
 How much can Mike and Rose deduct as self-employed health insurance?

Accepted Answer

The answer of Mike and Rose are married and file...

Question 8

Margo has $2,200 withheld from her wages for state income taxes during 2018.In March of 2018, she paid $400 in additional taxes for her 2017 state tax return.Her state income tax liability for 2018 is $2,700 and she pays the additional $500 when she files her 2018 state tax return in April of 2019.What amount should Margo deduct as an itemized deduction for state income taxes on her 2018 federal income tax return, assuming she deducts state and local income taxes?

Accepted Answer

A) $2,100 
B) $2,500 
C) $2,600 
D) $3,100 
E) None of the above

Question 9

Donald, a 40-year-old married taxpayer, has a salary of $55,000 and interest income of $6,000.He is an active participant in his employer's pension plan.What is the maximum amount Donald can contribute to a Roth IRA in 2018?

Accepted Answer

A) $550 
B) $610 
C) $1,220 
D) $3,000 
E) $5,500

Question 10

Mortgage interest on a taxpayer's personal residence is not deductible on Schedule A.

Accepted Answer

A) True 
 B)False

Question 11

Fran paid the following amounts of interest during 2018: $$\begin{array} { l r } 
\text { Qualified home mortgage interest } & \$ 7,000 \
\text { Automobile loan interest } & \$ 500 \
\text { Qualified interest on second residence } & \$ 5,000 \
\text { Credit card interest } & \$ 300
\end{array}$$ Calculate the amount of Fran's interest deduction for 2018.

Accepted Answer

The answer of Fran paid the following amounts of interest...

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not deductible as interest expense on Schedule A?

Accepted Answer

A) Loan fee charged for appraisal service 
B) Home mortgage interest 
C) Mortgage interest on a second residence 
D) Home mortgage prepayment penalties 
E) All of the above are deductible as interest expense

Question 14

Gail is a single elementary school teacher.She buys the following items for use in her classroom in 2018: $\begin{array}{llcc}
  \text {  Construction paper and tissues} & \$45 \
 \text {Materials for decorating the classroom bulletin boards  } &\$200\
 \text { Attist's smock used for in-class finger painting } &\$30\
 \text { 12 Dozen erasers } &\$15\
\end{array}$
 What amount can Gail deduct either as a for or from AGI deduction in 2018?

Accepted Answer

A) $250 as a for AGI deduction and $30 as a from AGI deduction (subject to 2% of AGI) 
B) $250 as a for AGI deduction and $0 as a from AGI deduction 
C) $290 as a for AGI deduction and $0 as a from AGI deduction 
D) $250 as a for AGI deduction and $40 as a from AGI deduction

Question 15

A 42-year-old single taxpayer earning a salary of $136,000 a year can make which of the following IRA contributions if he is not covered by a plan at work?

Accepted Answer

A) $5,500 to either a traditional IRA, a Roth IRA, or a nondeductible IRA 
B) $4,500 to either a traditional IRA, a Roth IRA, or a nondeductible IRA 
C) $5,500 to a Roth IRA only 
D) $5,500 to either a traditional IRA or a nondeductible IRA, but no contribution is allowed to a Roth IRA

Question 16

Steven is 27 years old and has a total AGI of $110,000 in 2018.He contracts pneumonia in 2018 and incurs a medical bill that totals $7,500.He withdraws $7,500 from his traditional IRA to pay the bill.Which of the following is true?

Accepted Answer

A) He is not subject to penalties on the IRA withdrawal because it was for medical expenses. 
B) He is not subject to penalties on the IRA withdrawal because he was disabled by pneumonia for 2 weeks. 
C) He is subject to penalties on the IRA withdrawal because a person may not take a withdrawal from a traditional IRA until they are 59½ years old no matter what. 
D) He is subject to penalties on the IRA withdrawal because the withdrawal did not cover a portion of medical bills that exceeded 7.5 percent of his AGI. 
E) None of the above is correct.

Question 17

For 2018, 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: $\begin{array}{llcc}
  \text {  Medical insurance premiums} &  \$3,200\
 \text { Hospital bills (knee replacement for Bob) } &\$4,400\
 \text { Hospital bills (face lift for Betsy) } &\$2,600\
 \text {Doctor bills  } &\$750\
 \text {Dentist bills  } &\$250\
 \text {Prescription eyeglasses  } &\$380\
\text { Acupuncture treatments (for Bob's knee pain prior to his operation) }&\$300
\end{array}$

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 2018.​

Accepted Answer

The answer of For 2018, Betsy and Bob, ages 62...

Question 18

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 the above

Question 19

In 2018, David, age 65, had adjusted gross income of $32,000.During the year he paid the following medical expenses: $$\begin{array} { l r } 
\text { Prescription medicines } & \$ 200 \
\text { Doctors } & \$ 2,500 \
\text { Medical care insurance } & \$ 1,400 \
\text { Over-the-counter hair growth tonic } & \$ 250
\end{array}$$ What amount can David deduct as medical expenses (after the adjusted gross income limitation)in calculating his itemized deductions for 2018?

Accepted Answer

A) $0 
B) $900 
C) $1,700 
D) $4,100 
E) None of the above

Question 20

Which of the following is not considered a deductible medical expense?

Accepted Answer

A) A face lift 
B) Eye exams 
C) Prescription drugs 
D) Medical insurance

Exam 5: Deductions and Adjustments to Income

Matthew purchases a new principal residence in the current year and pays points of $2,000 to obtain a mortgage loan.What is the proper tax treatment for the points paid?

Meade paid $5,000 of state income taxes in 2018.The total actual sales taxes paid during 2018 was $4,500, which did not include $3,000 for the sales taxes paid in 2018 on Meade's new boat.How should Meade treat the taxes paid in his 2018 tax return?

What is the maximum amount a 30-year-old taxpayer and a 35-year-old spouse can put into a Traditional or Roth IRA for 2018, assuming they earn $50,000 in total and are not covered by pension plans?

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.

Donald, a 40-year-old married taxpayer, has a salary of $55,000 and interest income of $6,000.He is an active participant in his employer's pension plan.What is the maximum amount Donald can contribute to a Roth IRA in 2018?

Mortgage interest on a taxpayer's personal residence is not deductible on Schedule A.

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

Which of the following is not deductible as interest expense on Schedule A?

A 42-year-old single taxpayer earning a salary of $136,000 a year can make which of the following IRA contributions if he is not covered by a plan at work?

Steven is 27 years old and has a total AGI of $110,000 in 2018.He contracts pneumonia in 2018 and incurs a medical bill that totals $7,500.He withdraws $7,500 from his traditional IRA to pay the bill.Which of the following is true?

Which of the following types of interest is not deductible?

Which of the following is not considered a deductible medical expense?