A married couple is preparing to file a joint federal income tax return for the current year.
Question:
A married couple is preparing to file a joint federal income tax return for the current year. They qualify to itemize their deductions. Their AGI is $55,000, and during the year they paid the following taxes:
Real estate taxes on personal residence | $2,000 |
Personal property taxes on automobile | 500 |
Current-year state and city income taxes withheld from paycheck | 1,000 |
What total amount should the taxpayers deduct for taxes as an itemized deduction?
2.A husband and wife will file a Year 1 income tax return as married filing jointly. Among their expenditures during Year 1 were the following medical costs:
A hair transplant for the husband solely to improve his appearance. The procedure was performed by a licensed physician. | $3,600 |
Surgery to correct complications from a prior face-lift for the wife. The original face-lift was performed solely to improve the wife's appearance. Both the original face-lift and the corrective surgery were performed by the same licensed physician. | 5,000 |
What is the amount of their tax-deductible medical expenses for Year 1 before the AGI limitation?
3.Taylor, an unmarried taxpayer, had $90,000 in adjusted gross income for Year 13. During Year 13, Taylor donated land to a church and made no other contributions. Taylor purchased the land in Year 1 as an investment for $14,000. The land's fair market value was $25,000 on the day of the donation.
What is the maximum amount of charitable contribution that Taylor may deduct as an itemized deduction for the land donation for Year 13?
4.Married taxpayers are filing a joint income tax return. They derive their entire income from the operation of their retail candy shop. Their Year 1 AGI was $50,000. The taxpayers itemized their deductions on Schedule A for Year 1. The following unreimbursed cash expenditures were among those made by the taxpayers during Year 1:
State income tax | $1,200 |
Self-employment tax | 7,650 |
What amount should the taxpayers deduct for taxes in their itemized deductions on Schedule A for Year 1?
5.A single taxpayer has adjusted gross income of $40,000 in the current year. During the year, a hurricane causes $4,100 damage to the taxpayer's personal use car, on which the taxpayer has no damage insurance. The area in which the damage occurred was a federally declared disaster area. The taxpayer purchased the car for $20,000. Immediately before the hurricane, the car's fair market value was $11,000, and immediately after the hurricane its fair market value was $6,900. Assuming the taxpayer elects to itemize deductions, what amount should the taxpayer deduct as a casualty loss for the current year after all threshold limitations are applied?
6.Which expense, both incurred and paid during the year, can be claimed as an itemized deduction?
6.A taxpayer had AGI of $60,000 in Year 1. During the same year, the taxpayer incurred $10,000 in qualifying unreimbursed medical expenses, all which were charged to a credit card. The taxpayer paid off $7,000 of the credit card charges by December 31 of Year 1. What amount may the taxpayer deduct as an itemized deduction for medical expenses?
7.A taxpayer began living in a nursing home this year in order to receive medical care for a specific condition. The taxpayer has AGI of $25,000 and incurred the following unreimbursed expenses:
What amount may the taxpayer deduct from AGI this year as an itemized deduction?
8.Betty, a salesperson, is an employee with $52,000 AGI who maintains a home office for the convenience of her employer, Smart Systems. The office takes up 5% of Betty's home and is used exclusively for her job. Smart Systems reimburses all of Betty's direct costs of maintaining the home office. Betty also has the following expenses associated with her home:
Expense | Amount |
Real property taxes on residence | $3,500 |
Interest expense on residence | $5,000 |
Operating expenses on residence | $1,800 |
Depreciation on residence (based on 5% home office use) | $ 150 |
9.The Internal Revenue Service is auditing Oate's Year 6 Form 1040, Individual Income Tax Return. During Year 6, Oate, an unmarried custodial parent, had one dependent three-year-old child and worked in a CPA firm. For Year 6, Oate, who had adjusted gross income of $40,000 qualified to itemize deductions and was subject to federal income tax liability.
Required:
For each tax activity below, select the appropriate tax treatment. A tax treatment may be selected once, more than once, or not at all.
Activity | Tax Treatment |
In Year 6, Oate paid $900 toward continuing education courses and was not reimbursed by her employer. | |
For Year 6, Oate had a $30,000 charitable contribution carryover from her Year 5 property donation to the Salvation Army. Oate made no additional charitable contributions in Year 6. | |
During Year 6, Oate had investment interest expense that did not exceed her net investment income. | |
Oate's Year 6 lottery ticket losses were $450. She had no gambling winnings. | |
During Year 6, Oate paid $2,500 in real property taxes on her vacation home, which she used exclusively for personal use. | |
In Year 6, Oate paid a $500 premium for a homeowner's insurance policy on her principal residence. | |
For Year 6, Oate paid $1,500 to an unrelated baby-sitter to care for her child while she worked. | |
In Year 6, Oate paid $4,000 interest on the $60,000 acquisition mortgage of her principal residence. The mortgage is secured by Oate's home. | |
During Year 6, Oate paid $3,600 real property taxes on residential rental property in which she actively participates. There was no personal use of the rental property. 10.Jefferson's investment income consisted of $2,000 in interest from a U.S. Treasury bond and $1,000 interest from a municipal bond. Jefferson also paid $4,000 in investment interest expense. Assuming that Jefferson itemizes, what amount can Jefferson deduct for investment interest expense?
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Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill