Exam 10: Deduction and Losses Certain Itemized Deductions

Charles,who is single and age 61,had AGI of $400,000 during 2016.He incurred the following expenses and losses during the year. Medical expenses before 10%-of-AGI floor $39,500 State and local income taxes 5,200 Real estate taxes 4,400 Home mortgage interest 5,400 Charitable contributions 4,800 Casualty loss before 10% limitation (after $100 floor) 47,000 Unreimbursed employee expenses subject to 2%-of-AGI limitation 8,900 Gambling losses (Charles had $7,400 of gambling income) 9,800 Compute Charles's total itemized deductions for the year.

Herbert is the sole proprietor of a furniture store.He can deduct real property taxes on his store building as a business deduction but he cannot deduct state income taxes related to his net income from the furniture store as a business deduction.

Shirley pays FICA (employer's share)on the wages she pays her maid to clean and maintain Shirley's personal residence.The FICA payment is not deductible as an itemized deduction.

Helen pays nursing home expenses of $3,000 per month for her mother.The monthly charge covers the following items: $1,400 for medical care,$900 for lodging,and $700 for food.Under what circumstances can Helen include the $3,000 per month payment when computing her medical expense deduction for the year? If Helen is not allowed to include the entire payment,how much can she include?

Employee business expenses for travel qualify as itemized deductions subject to the 2%-of-AGI floor if they are not reimbursed.

Diane contributed a parcel of land to the United Way.In addition,she contributed bibles and song books from her proprietorship's book store inventory to First Church,a qualified charitable organization.Should Diane's charitable contribution deduction for these contributions be determined by the basis or fair market value of the contributed items?

Joe,who is in the 33% tax bracket this year,expects to retire next year and be in the 25% 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 next year.Discuss Joe's tax objectives and all tax issues related to his actions.

In April 2016,Bertie,a calendar year cash basis taxpayer,had to pay the state of Michigan additional income tax for 2015.Even though it relates to 2015,for Federal income tax purposes the payment qualifies as a tax deduction for tax year 2016.

Trent sells his personal residence to Chester on July 1,2016.He had paid $7,000 in real property taxes on March 1,2016,the due date for property taxes for 2016.Trent may not deduct the portion of the taxes he paid for the period the property was owned by Chester.

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.

Maria made significant charitable contributions of capital gain property in the current year.In fact,the amount of the contributions exceeds 30% of her AGI.The excess charitable contribution that is not deductible this year can be carried over for five years.

Chad pays the medical expenses of his son,James.James would qualify as Chad's dependent except that he earns $7,500 during the year.Chad may claim James' medical expenses even if he is not a dependent.

Phillip,age 66,developed hip problems and was unable to climb the stairs to reach his second-floor bedroom.His physician advised him to add a first-floor bedroom to his home.The cost of constructing the room was $32,000.The increase in the value of the residence as a result of the room addition was determined to be $17,000.In addition,Phillip paid the contractor $5,500 to construct an entrance ramp to his home and $8,500 to widen the hallways to accommodate his wheelchair.Phillip's AGI for 2016 was $100,000.How much of these expenditures can Phillip deduct as a medical expense in 2016?

Brian,a self-employed individual,pays state income tax payments of: $900 on January 15,2016 (4th estimated tax payment for 2015) $1,000 on April 15,2016 (1st estimated tax payment in 2016) $1,000 on June 15,2016 (2nd estimated tax payment in 2016) $1,000 on September 15,2016 (3rd estimated tax payment in 2016) $800 on January 17,2017 (4th estimated tax payment of 2016) Brian had a tax overpayment of $500 on his 2015 state income tax return and applied this to his 2016 state income taxes.What is the amount of Brian's state income tax itemized deduction for his 2016 Federal income tax return?

Gambling losses may be deducted to the extent of the taxpayer's gambling winnings.Such losses are subject to the 2%-of-AGI floor for miscellaneous itemized deductions.

Personal expenditures that are deductible as itemized deductions include medical expenses,Federal income taxes,state income taxes,property taxes on a personal residence,mortgage interest,and charitable contributions.

Harry and Sally were divorced three years ago.In July of the current year,their son,Joe,broke his arm falling out of a tree.Joe lives with Sally and Sally claims him as a dependent on her tax return.Harry paid for the medical expenses related to Joe's injury.Can Harry claim the medical expenses he paid for Joe on his tax return?

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?

Phyllis,a calendar year cash basis taxpayer who itemized deductions totaling $20,000,overpaid her 2015 state income tax and is entitled to a refund of $400 in 2016.Phyllis chooses to apply the $400 overpayment toward her state income taxes for 2016.She is required to recognize that amount as income in 2016.

A taxpayer pays points to obtain financing to purchase a second residence.At the election of the taxpayer,the points can be deducted as interest expense for the year paid.