Exam 10: Deductions and Losses: Certain Itemized Deductions

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.

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.

A taxpayer may not deduct the cost of new curbing (relative to a personal residence), even if the construction is required by the city and the curbing provides an incidental benefit to the public welfare.

Letha incurred a $1,600 prepayment penalty to a lending institution because she paid off the mortgage on her home early. The $1,600 is deductible as interest expense.

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?

Pedro's child attends a school operated by the church the family attends. Pedro made a donation of $1,000 to the church in lieu of the normal registration fee of $200. In addition, Pedro paid the regular tuition of $6,000 to the school. Based on this information, what is Pedro's charitable contribution?

Paul, a calendar year married taxpayer, files a joint return for 2017. Information for 2017 includes the following: Paul's allowable itemized deductions for 2017 are:

Richard, age 50, is employed as an actuary. For calendar year 2017, he had AGI of $130,000 and paid the following medical expenses: Derrick and Jane would qualify as Richard's dependents except that they file a joint return. Richard's medical insurance policy does not cover them. Richard filed a claim for $4,800 of his own expenses with his insurance company in November 2017 and received the reimbursement in January 2018. What is Richard's maximum allowable medical expense deduction for 2017?

The election to itemize is appropriate when total itemized deductions are less than the standard deduction based on the taxpayer's filing status.

Linda borrowed $60,000 from her parents for a down payment on a condominium. She paid interest of $5,500 in 2015, $0 in 2016, and $9,000 in 2017. The IRS disallowed the deduction. Can you offer any explanation for the disallowance?

Hannah makes the following charitable donations in the current year: ​ The HBM stock and the inventory were given to Hannah's church, and the baseball card collection was given to the United Way. Both donees promptly sold the property for the stated fair market value. Disregarding percentage limitations, Hannah's current charitable contribution deduction is:

During 2017, Kathy, who is self-employed, paid $650 per month for an HSA contract that provides medical insurance coverage with a $3,000 deductible. The plan covers Kathy, her husband, and their three children. Of the $650 monthly fee, $300 was for the high-deductible policy, and $350 was deposited into an HSA. How much of the amount paid for the high-deductible policy can Kathy deduct as a deduction for AGI?

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?

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.

For all of the current year, Randy (a calendar year taxpayer) allowed the Salvation Army to use a building he owns rent-free. The building normally rents for $24,000 a year. Randy will be allowed a charitable contribution deduction this year of $24,000.

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?

Sadie mailed a check for $2,200 to a qualified charitable organization on December 31, 2017. The $2,200 contribution is deductible on Sadie's 2017 tax return.

Leona borrows $100,000 from First National Bank and uses the proceeds to purchase City of Houston bonds. The interest Leona pays on this loan is deductible as investment interest subject to the investment interest limits.

Sergio was required by the city to pay $2,000 for the cost of new curbing installed by the city in front of his personal residence. The new curbing was installed throughout Sergio's neighborhood as part of a street upgrade project. Sergio may not deduct $2,000 as a tax, but he may add the $2,000 to the basis of his property.

Paul and Patty Black (both are age 66) are married and together have AGI of $105,000 in 2017. They have two dependents and file a joint return. During the year, they paid $8,000 for medical insurance, $15,000 in doctor bills and hospital expenses, and $1,000 for prescribed medicine and drugs. a.In December 2017, the Blacks received an insurance reimbursement of $3,500 for hospitalization expenses. Determine the deduction allowable for medical expenses paid during the year. b.Assume instead that the Blacks received the $3,500 insurance reimbursement in February 2018. Determine the deduction allowable for medical expenses incurred in 2017. c.Assume that the Blacks received the $3,500 insurance reimbursement in February 2018. Discuss whether the reimbursement will be included in their gross income for 2018.