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Exam 10: Deductions and Losses: Certain Itemized Deductions

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Question 41

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Points paid by the owner of a personal residence to refinance an existing mortgage must be capitalized and amortized over the life of the new mortgage.

A) True
B) False

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Question 42

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Maria traveled to Rochester, MN with her son who had surgery at the Mayo Clinic. He stayed at the clinic for the duration of his treatment. She paid airfare of $300 and $50 per night for lodging. The cost of Maria's airfare and lodging cannot be included in determining her medical expense deduction.

A) True
B) False

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Question 43

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For purposes of computing the deduction for qualified residence interest, a qualified residence includes the taxpayer's principal residence and two other residences of the taxpayer or spouse.

Sadie mailed a check for $2,200 to a qualified charitable organization on December 31, 2019. The $2,200 contribution is deductible on Sadie's 2019 tax return if she itemizes her deductions.

Mason, a physically handicapped individual, pays $10,000 this year for the installation of wheelchair ramps, support bars, and railings in his personal residence. These improvements increase the value of his personal residence by $2,000. Only $8,000 of the expenditure qualifies as a medical expense for tax purposes.

Gambling losses may be deducted to the extent of the taxpayer's gambling winnings.

Which of the following is not allowed as an itemized deduction?

Joe, who is in the 32% tax bracket this year, expects to retire next year and be in the 22% tax bracket. He plans to donate $50,000 to his church. Because he will not have the cash available until next year, Joe donates land (long- term capital gain property) with a basis of $10,000 and fair market value of $50,000 to the church in December of the current year. He reacquires the land for $50,000 in February of the next year. Discuss Joe's tax objectives and all tax issues related to his actions.

Phyllis, who is single, has itemized deductions totaling $20,000. She overpaid her 2018 state income tax and is entitled to a refund of $400 in 2019. Phyllis chooses to apply the $400 overpayment toward her state income taxes for 2019. She is required to recognize that amount as income in 2019.

For purposes of computing the deduction for qualified residence interest, a qualified residence includes only the taxpayer's principal residence.

In Lawrence 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 (assume that this year is not a leap year) . The tax is payable on June 1. On May 1, Reggie sells his house to Dana for $350,000. On June 1, Dana pays the entire real estate tax of $7,950 for the year ending December 31. Assuming that Reggie itemizes his deductions and the $10,000 limit on state and local taxes does not apply, how much of the property taxes may Reggie deduct?

Employee business expenses for travel may be deducted as itemized deductions if they are not reimbursed.

In 2019, 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?

For calendar year 2019, Jon and Betty Hansen (ages 59 and 60) file a joint return reflecting AGI of $280,000. They incur the following expenditures: $\begin{array} { l r } \text { Medical expenses before 10\%-of-AGI floor } & \$ 30,000 \\\text { Casualty loss caused by electrical fire in their home } & 30,000 \\\text { Interest on home mortgage } & 11,000 \\\text { Interest on credit cards } & 800 \\\text { Property taxes on home } & 13,000 \\\text { Charitable contributions } & 17,000 \\\text { State income tax } & 15,000 \\\text { Tax return preparation fees } & 1,200\end{array}$ What is the amount of itemized deductions the Hansens may claim?

Bill paid $2,500 of medical expenses for his daughter, Marie. She is married to John and they file a joint return. Bill can include the $2,500 of expenses when calculating his medical expense deduction.

Hugh, a self-employed individual, paid the following amounts during the year: $\begin{array}{lr}\text { Real estate tax on Iowa residence } & \$ 3,800 \\\text { State income tax } & 1,700 \\\text { Real estate taxes on a vacation home } & 2,100 \\\text { Gift tax paid on gift to daughter } & 1,200 \\\text { State sales taxes } & 1,750 \\\text { State occupational license fee } & 300 \\\text { Property tax on value of his automobile (used 100\% for business) } & 475\end{array}$ What is the maximum amount Hugh can claim as taxes in itemizing deductions from AGI?

Capital assets donated to a public charity that would result in long-term capital gain if sold are subject to the 30%-of- AGI ceiling limitation on charitable contributions for individuals.

In Piatt 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 and is payable on July 1 in the real property tax year. On June 30 of this year (assume it is not a leap year), Harry sells his house to Judy for $110,000 and on July 1, Judy pays the entire real estate tax of $4,380 for the current year ending December 31. a. How much of the property taxes may Harry deduct? b. How much of the property taxes may Judy deduct?

In the current year, Jerry pays $8,000 to become a charter member of Mammoth University's Athletic Council. The membership ensures that Jerry will receive choice seating at all of Mammoth's home basketball games. Also this year, Jerry pays $2,200 (the regular retail price) for season tickets for himself and his wife. For these items, how much qualifies as a charitable contribution?

Fees for automobile inspections, automobile titles and registration, bridge and highway tolls, parking meter deposits, and postage are not deductible if incurred for personal reasons, but they are deductible as deductions for AGI if incurred as a business expense by a self-employed taxpayer.