Problem 5-12 Simplified Employee Pensions (LO 5.4)

Mario, a self-employed plumber, makes a maximum contribution to a SEP for his employee, Peach. Peach's compensation is $50,000 for the year. How much is he allowed to contribute to the plan for Peach?

Problem 5-13 (Algorithmic) Qualified Retirement Plans Including Section 401(K) Plans (LO 5.4)

During 2021, Jill, age 39, participated in a Section 401(k) plan which provides for maximum employee contributions of 6%. Jill's salary was $50,800 for the year. Jill elects to make the maximum contribution.

What is Jill's maximum tax-deferred contribution to the plan for the year?

Problem 5-14 (Algorithmic) Medical Expenses (LO 5.6)

Linda installed a special pool for the hydrotherapeutic treatment of severe arthritis, as prescribed by her doctor. The cost of installing the pool was $24,800, and her insurance company paid $6,200 toward its cost. The pool increased the value of Linda's house by $8,680, and it has a useful life of 10 years.

How much of a deduction (before any AGI limitations) is Linda entitled to in the year of installation of the pool?

Problem 5-15 Medical Expenses (LO 5.6)

In 2021, Margaret and John Murphy (age 66 and 68, respectively) are married taxpayers who file a joint tax return with AGl of $27,254. During the year they incurred the following expenses:

Medical insurance premiums	$1,200
Premiums on an insurance policy that pays $100 per day for each day Margaret is hospitalized	400
Medical care lodging (two people, one night)	140
Hospital bills	2,500
Herbal supplements	75
Dentist bills	240
Prescription drugs and medicines	360
Cosmetic surgery	400

In addition, they drove 100 miles for medical transportation, and their insurance company reimbursed them $450 for the above expenses. On the following segment of Schedule A of Form 1040, calculate the Murphy's medical expense deduction.

If required, round any amount to the nearest dollar. Enter all amounts as positive numbers.

		Caution. Do not include expenses reimbursed or paid by others.
Medical and Dental Expenses	1	Medical and dental expenses (see instructions) . . . . . . . . . . . . . .	1	fill in the blank 1
2	Enter amount from Form 1040 or 1040-SR, line 11. . . . .	2	fill in the blank 2
3	Multiply line 2 by 7.5% (0.075) . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3	fill in the blank 3
4	Subtract line 3 from line 1. If line 3 is more than line 1, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . .	4	fill in the blank 4

Problem 5-17 Taxes (LO 5.7)

Lyndon's employer withheld $8,700 in state income taxes from Lyndon's wages in 2021. Lyndon obtained a refund of $1,700 in this year for overpayment of state income taxes for 2020. State income taxes were an itemized deduction on his 2020 return. His 2021 liability for state income tax is $8,500.

Indicate the amount of Lyndon's deduction for state income taxes on his federal tax return assuming he elects to deduct state income taxes for 2021

Problem 5-22 (Algorithmic) Interest (LO 5.8)

Matthew borrows $295,000 to invest in bonds. During the current year, his interest on the loan is $29,500. Matthew's taxable interest income from the bonds is $17,700. This is Matthew's only investment income and he has no other investment expenses other than the interest on the loan.

a. Calculate Matthew's itemized deduction for investment interest expense for this year. $fill in the blank 1

b. Is Matthew entitled to a deduction (related to the investment interest expense) in future years?

YesNoYes

, the unused deduction of $fill in the blank 3

maymay notmay

be carried forward as an investment interest deduction in future years.

Problem 5-24 (Algorithmic) Interest (LO 5.8)

Janet and James purchased their personal residence 15 years ago for $422,500. For the current year, they have an $105,625 first mortgage on their home, on which they paid $5,281 in interest. They also have a home equity loan to pay for the children's college tuition secured by their home with a balance throughout the year of $118,250. They paid interest on the home equity loan of $11,825 for the year. Calculate the amount of their deduction for interest paid on qualified residence acquisition debt and qualified home equity debt for the current year.

It an amount is zero, enter "0".

a.	Qualified residence acquisition debt interest	$fill in the blank 1
b.	Qualified home equity debt interest	$fill in the blank 2

Problem 5-26 Interest (LO 5.8)

At the end of 2021, Mark owes $250,000 on the mortgage related to the 2016 purchase of his residence. When his daughter went to college in the fall of 2021, he borrowed $20,000 through a home equity loan on his house to help pay for her education. The interest expense on the main mortgage is $15,000, and the interest expense on the home equity loan is $1,500. How much of the interest is deductible as an itemized deduction?

$fill in the blank 1 is deductible because the

home equity debtmain mortgagesum of main mortgage and the home equity debthome equity debt

is not deductible.

Problem 5-27 Contributions (LO 5.9)

Barbara donates a painting that she purchased three years ago for $8,000, to a university for display in the president's office. The fair market value of the painting on the date of the gift is $14,000. If Barbara had sold the painting, the difference between the sales price and her cost would have been a long-term capital gain.

How much is Barbara's charitable contribution deduction for this donation?

$fill in the blank 1 is deductible because the painting

waswas notwas not

put to a use directly related to the organization's primary purpose.

Problem 5-30 Contributions (LO 5.9)

Kathy, a single taxpayer, donates cash of $600 and also provides some gently-used clothing worth $150 to a local church. Kathy does not itemize deductions.

What is the nature of any deduction for these items for Kathy in 2021. Since Kathy

doesdoes notdoes not

itemize, she is entitled to only the $fill in the blank 2 deduction

for AGIfrom AGIfrom AGI

available for cash contributions in 2021.