Deck 10: Deductions and Losses: Certain Itemized Deductions

Question 1

Erica,Carol's daughter,has a mild form of autism.Dr.Malone recommends that Carol send Erica to a special school for autistic children when she enters first grade.Erica may include the cost of tuition,meals,and lodging for the special school when computing her medical expense deduction.

Answer 1

True

Question 2

In 2011,Rhonda received an insurance reimbursement for medical expenses incurred in 2010.She is not required to include the reimbursement in gross income in 2011 if she claimed the standard deduction in 2010.

Answer 2

True

Question 3

Betty,who is an accounting firm partner,paid $4,800 for medical insurance coverage for herself.She can include the $4,800 when calculating her itemized medical expense deduction.

Answer 3

False

Question 4

Ed paid $1,660 of medical expenses for his son Mark.Mark is married to Judy and they file a joint return.Ed cannot include the $1,660 when calculating his medical expense deduction.

Question 5

Barbara,who is self-employed,paid $3,600 for medical insurance coverage.She can include 100% of the $3,600 when calculating her itemized medical expense deduction.

Question 6

Georgia contributed $2,000 to a qualifying Health Savings Account in 2010.The entire amount qualifies as a medical expense and is potentially deductible as an itemized deduction.

Question 7

The election to itemize is appropriate when the taxpayer's allowable itemized deductions exceed the allowable standard deduction.

Question 8

Ernie sold his personal residence to Amanda on July 1,2010.He had paid $3,900 in real property taxes on March 1,2010,the due date for property taxes for 2010.Ernie must reduce the amount realized for his property by the portion of the $3,900 allocable to Amanda.

Question 9

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.

Question 10

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 not claim James' medical expenses because he is not a dependent.

Question 11

Bert resides in a nursing home primarily for medical reasons rather than personal reasons.Costs for meals and lodging can be included in determining his deductible medical expenses.

Question 12

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.

Question 13

Taxes assessed for local benefits,such as a new sidewalk,are not deductible as real property taxes.

Question 14

Upon the recommendation of a physician,Ed has a swimming pool installed at his residence because of a heart condition.If he is allowed to deduct all or part of the cost of the pool,Ed's increase in utility bills due to the operation of the pool qualifies as a medical expense.

Question 15

Medical expenses must relate to a particular ailment in order to be deductible.The cost of a periodic physical exam is not deductible because it relates to the taxpayer's general state of health.

Question 16

Stewart,a calendar year taxpayer,pays $6,000 in medical expenses in 2010.Even if he expects $3,000 of these expenses to be reimbursed by an insurance company in 2011,Stewart can include all $6,000 of the expenses in determining his medical expense deduction for 2010.

Question 17

George,a sculptor,has an elevator installed in his house to transport heavy materials to his loft studio because he is concerned that he might strain his back by lifting heavy objects.George may deduct the full cost of the elevator as a medical expense.

Question 18

Mindy paid an appraiser to determine how much a capital improvement made for medical reasons increased the value of her personal residence.The appraisal fee qualifies as a deductible medical expense.

Question 19

Walter traveled to another city to obtain specialized outpatient medical care not available in his hometown.His sister accompanied him because he was too ill to travel alone.He may include the cost of his airfare and lodging (up to $50 per night for himself and up to $50 per night for his sister)in determining his medical expense deduction.

Question 20

In 2010,Mary traveled 800 miles for specialized medical treatment that was not available in her hometown.She paid $60 for meals during the trip,$105 for a hotel room on Tuesday night,and $20 in parking fees.She did not keep records of other out-of-pocket costs for transportation.Mary can include $202 in computing her medical expenses.

Question 21

Judy paid $40 for Girl Scout cookies and $40 for Boy Scout popcorn.Judy may claim an $80 charitable contribution deduction.

Question 22

If certain conditions are met,a buyer may deduct seller-paid points in the tax year in which they are paid.

Question 23

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.

Question 24

Tony,a cash basis taxpayer,took out a 12-month business loan on December 1,2010.He prepaid all $4,200 of the interest on the loan on December 1,2010.Tony can deduct all $4,200 of the prepaid interest in 2010.

Question 25

Phyllis,a calendar year cash basis taxpayer who itemized deductions,overpaid her 2010 state income tax and is entitled to a refund of $400.Phyllis chooses to apply the $400 overpayment toward her state income taxes for 2011.She is not required to recognize that amount as income in 2011.

Question 26

Bob sold a personal residence to Fred and paid points of $2,000 on the loan to help Fred finance the purchase.Bob can deduct the points as interest.

Question 27

Interest paid or accrued during the tax year on aggregate acquisition indebtedness of $2 million or less ($1 million or less for married persons filing separate returns)is deductible as qualified residence interest.

Question 28

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

Question 29

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.

Question 30

On December 23,2010,Megan used her credit card to make a $750 contribution to the United Way,a qualified charitable organization.She will pay her credit card balance in January 2011.If Megan itemizes,she cannot deduct the $750 in 2010.

Question 31

José sells his personal residence to Manuel on July 1,2010.He had paid $4,000 in real property taxes on March 1,2010,the due date for property taxes for 2010.José may deduct the portion of the taxes he paid for the period the property was owned by Manuel.

Question 32

In 2010,Michelle,single,paid $2,500 interest on a qualified student loan.Her MAGI was $65,000.She may deduct the $2,500 interest as a deduction for AGI.

Question 33

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.

Question 34

Carolyn mailed a check for $1,000 to a qualified charitable organization on December 31,2010.The $1,000 contribution is not deductible on Carolyn's 2010 tax return because the charity does not receive the check until 2011.

Question 35

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

Question 36

Grace's sole source of income is from a restaurant that she owns and operates as a proprietorship.Any state income tax Grace pays on the business net income must be deducted as a business expense rather than as an itemized deduction.

Question 37

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.

Question 38

Jennifer,who is single and whose MAGI is $100,000,paid $2,500 interest on a qualified student loan in 2010.She may deduct the interest as a deduction for AGI.

Question 39

In April 2010,Hiram,a calendar year cash basis taxpayer,paid the state of Nebraska additional income tax for 2009.Since it relates to 2009,for Federal income tax purposes the payment qualifies as a tax deduction for tax year 2009.

Question 40

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

Question 41

Dwayne contributed stock worth $17,000 to a qualified charity.He acquired the stock fourteen months ago for $8,000.He may deduct $17,000 as a charitable contribution deduction (subject to percentage limitations).

Question 42

Bjorn contributed a sculpture to the Norwegian Art Museum of Oslo,Norway.The sculpture,purchased six years ago,was worth $50,000 when donated,and Bjorn's basis was $10,000.If this sculpture is retained and displayed by the museum,Bjorn's charitable contribution deduction is $50,000 (subject to percentage limitations).

Question 43

Antonio,who is single and lives alone,is physically handicapped as a result of a skiing accident.In order to live independently,he modifies his personal residence at a cost of $10,000.The modifications included widening halls and doorways for a wheelchair,installing support bars in the bathroom and kitchen,installing a stairway lift,and rewiring so he could reach electrical outlets and appliances.His neighbor,who is in the real estate business,charges Antonio $100 for an appraisal that places the value of the residence at $106,000 before the improvements and $108,000 after.As a result of the operation of the stairway lift,Antonio noticed an increase of $225 in his utility bills for the current year.Disregarding percentage limitations,how much of the above expenditures qualify as medical expense deductions?

A)$10,225.
B)$8,325.
C)$8,225.
D)$8,000.
E)None of the above.

Question 44

During the year,Victor spent $300 on bingo games sponsored by his church.If all profits went to the church,Victor has a charitable contribution deduction of $300.

Question 45

The reduced deduction election enables a taxpayer to move from the 30% of AGI limitation to the 50% of AGI limitation.

Question 46

In applying the percentage limitations,carryovers of charitable contributions must be claimed after contributions in the current year are considered (FIFO rule).

Question 47

During the year,Eve (a resident of Billings,Montana)spends three consecutive weeks in Louisville,Kentucky.One week is spent representing the Billings First Christian Church at the national convention,and two weeks are spent vacationing with relatives.One third of Eve's travel expenses will qualify as a charitable deduction.

Question 48

John gave $1,000 to a family whose house was destroyed by fire.John may claim a charitable deduction of $1,000 on his tax return for the current year.

Question 49

Contributions to public charities in excess of 50% of AGI may be carried back 3 years or forward for up to 5 years.

Question 50

In the year of her death,Maria made significant charitable contributions of capital gain property.In fact,the amount of the contributions exceeds 30% of her AGI.Maria's executor can elect to deduct charitable contributions of up to 50% of Maria's AGI on Maria's final income tax return.

Question 51

Martha drove 200 miles to volunteer in a project sponsored by a qualified charitable organization.In addition,she spent $150 for meals while away from home.She may take a charitable contribution deduction of $178 [$150 + (200 miles ´ $0.14)].

Question 52

Larry and Beth are married and together have AGI of $80,000 in 2010.They have two dependents and file a joint return.They pay $3,000 for a high deductible health insurance policy and they contribute $2,400 to a qualified Health Savings Account.During the year,they paid the following amounts for medical care: $7,500 in physician and dentist bills and hospital expenses,and $1,700 for prescribed medicine and drugs.In November 2010,they received an insurance reimbursement of $2,100 for hospitalization.They expect to receive an additional reimbursement of $1,000 in January 2011.Determine the maximum deduction allowable for medical expenses in 2010.

A)$4,100.
B)$6,100.
C)$7,100.
D)$10,100.
E)None of the above.

Question 53

Wendy,who is single,travels frequently on business.Brent,Wendy's 84-year-old dependent grandfather,lived with Wendy until this year when he moved to Desert Springs Nursing Home because he needs daily medical and nursing care.During the year,Wendy made the following payments on behalf of Brent: Desert Springs has medical staff in residence.Disregarding the 7.5% floor,how much,if any,of these expenses qualifies for a medical expense deduction by Wendy?

A)$1,870.
B)$13,970.
C)$16,390.
D)$16,808.
E)None of the above.

Question 54

Excess charitable contributions that come under the 30% of AGI ceiling are always subject to the 30% of AGI ceiling in the carryover year.

Question 55

Nancy had an accident while skiing on vacation.She sustained facial injuries that required cosmetic surgery.While having the surgery done to restore her appearance,she had additional surgery done to reshape her nose,which was not injured in the accident.The surgery to restore her appearance cost $12,000 and the surgery to reshape her nose cost $5,000.How much of Nancy's surgical fees will qualify as a deductible medical expense (before application of the 7.5% limitation)?

A)$0.
B)$5,000.
C)$12,000.
D)$17,000.
E)None of the above.

Question 56

In order to dissuade his pastor from resigning and taking a position with a larger church,Michael,an ardent leader of the congregation,gives the pastor a new car.The cost of the car is deductible by Michael as a charitable contribution.

Question 57

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

Question 58

Lonnie developed severe arthritis 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 $28,000.The increase in the value of the residence as a result of the room addition was determined to be $12,000.In addition,Lonnie paid the contractor $5,000 to construct an entrance ramp to his home and $7,000 to widen the hallways to accommodate his wheelchair.Lonnie's AGI for the year was $80,000.How much of these expenditures can Lonnie deduct as a medical expense?

A)$10,000.
B)$16,000.
C)$22,000.
D)$40,000.
E)None of the above.

Question 59

Jerry pays $5,000 tuition to a parochial school run by his church in order to enable his daughter to attend.This is the amount the school charges all students.Part of the tuition payments can be claimed as a charitable contribution.

Question 60

Rosita is employed as a systems analyst.For calendar year 2010,she had AGI of $120,000 and paid the following medical expenses: José and Carmen would qualify as Rosita's dependents except that they file a joint return.Rosita's medical insurance policy does not cover them.Rosita filed a claim for $3,150 of her own expenses with her insurance company in December 2010 and received the reimbursement in January 2011.What is Rosita's maximum allowable medical expense deduction for 2010?

A)$2,775.
B)$11,025.
C)$17,325.
D)$17,775.
E)None of the above.

Question 61

Ron and Tom are equal owners in Robin Corporation.On July 1,2010,each loans the corporation $20,000 at annual interest of 10%.Ron and Tom are brothers.Both shareholders are on the cash method of accounting,while Robin Corporation is on the accrual method.All parties use the calendar year for tax purposes.On June 30,2011,Robin repays the loans of $40,000 together with the specified interest of $4,000.How much of the interest can Robin Corporation deduct in 2010?

A)$0.
B)$1,000.
C)$2,000.
D)$4,000.
E)None of the above.

Question 62

Betty owned stock in General Corporation that she donated to a church (a qualified charitable organization)on July 28,2010.What is the amount of Betty's charitable contribution deduction assuming that she had purchased the stock for $13,400 on October 17,2009,and the stock had a value of $18,800 when she made the donation?

A)$5,400.
B)$13,400.
C)$16,100.
D)$18,800.
E)None of the above.

Question 63

In Shelby 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,2010.The tax is payable on June 1,2010.On April 30,2010,Julio sells his house to Anita for $230,000.On June 1,2010,Anita pays the entire real estate tax of $7,300 for the year ending December 31,2010.How much of the property taxes may Julio deduct?

A)$0.
B)$2,380.
C)$2,400.
D)$4,920
E)None of the above.

Question 64

In 2010,Barry pays a $3,000 premium for high-deductible medical insurance for himself and his family.In addition,he contributes $2,600 to a Health Savings Account.Which of the following statements is true?

A)If Barry is self-employed,he may deduct $5,600 as a deduction for AGI.
B)If Barry is self-employed,he may deduct $2,600 as a deduction for AGI and may include the $3,000 premium when calculating his itemized medical expense deduction.
C)If Barry is an employee,he may deduct $5,600 as a deduction for AGI.
D)If Barry is an employee,he may include $5,600 when calculating his itemized medical expense deduction.
E)None of the above.

Question 65

Joseph and Sandra,married taxpayers,took out a mortgage on their home for $350,000 in 1989.In May of this year,when the home had a fair market value of $450,000 and they owed $250,000 on the mortgage,they took out a home equity loan for $220,000.They used the funds to purchase a single engine airplane to be used for recreational travel purposes.What is the maximum amount of debt on which they can deduct home equity interest?

A)$50,000.
B)$100,000.
C)$220,000.
D)$230,000.
E)None of the above.

Question 66

Phil is advised by his family physician that his dependent son,Tony,needs surgery for a benign tumor in his leg.Phil and his son travel to Rochester,Minnesota,for in-patient treatment at the Mayo Clinic,which specializes in this type of surgery.Phil incurred the following costs: Compute Phil's medical expenses for the trip (before the 7.5% floor).

A)$2,550.
B)$2,750.
C)$2,970.
D)$3,120.
E)None of the above.

Question 67

Emily,who lives in Indiana,volunteered to travel to Louisiana in March to work on a home-building project for Habitat for Humanity (a qualified charitable organization).She was in Louisiana for three weeks.She normally makes $500 per week as a carpenter's assistant and plans to deduct $1,500 as a charitable contribution.In addition,she incurred the following costs in connection with the trip: $600 for transportation,$1,200 for lodging,and $400 for meals.What is Emily's deduction associated with this charitable activity?

A)$600.
B)$1,200.
C)$1,800.
D)$2,200.
E)$3,700.

Question 68

Terry pays $8,000 this year to become a charter member of Mammoth University's Athletic Council.The membership ensures that Terry will receive choice seating at all of Mammoth's home basketball games.In addition,Terry 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?

A)$6,200.
B)$6,400.
C)$8,000.
D)$10,200.
E)None of the above.

Question 69

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?

A)$0.
B)$800.
C)$1,000.
D)$6,800.
E)$7,000.

Question 70

Nick made the following contributions this year to the University of the West: Nick acquired the stock in Palm Corporation as an investment two years ago at a cost of $56,000.Nick's current AGI is $252,000.What is Nick's current charitable contribution deduction?

A)$75,600.
B)$84,000.
C)$126,000.
D)$210,000.
E)None of the above.

Question 71

Pat died this year.Before she died,Pat gave 5,000 shares of stock in Coyote Corporation (a publicly traded corporation)to her church (a qualified charitable organization).The stock was worth $180,000 and she had acquired it as an investment four years ago at a cost of $150,000.In the year of her death,Pat had AGI of $300,000.In completing her final income tax return,how much of the charitable contribution should Pat's executor deduct?

A)$90,000.
B)$150,000.
C)$180,000.
D)$210,000.
E)None of the above.

Question 72

Brad,who uses the cash method of accounting,lives in a state that imposes an income tax (including withholding from wages).On April 14,2010,he files his state return for 2009,paying an additional $600 in state income taxes.During 2010,his withholdings for state income tax purposes amount to $3,550.On April 13,2011,he files his state return for 2010 claiming a refund of $800.Brad receives the refund on August 3,2011.If he itemizes deductions,how much may Brad claim as a deduction for state income taxes on his Federal income tax return for calendar year 2010 (filed in April 2011)?

A)$3,350.
B)$3,550.
C)$4,150.
D)$5,150.
E)None of the above.

Question 73

Mel made the following donations to charity during the year: The used clothing was donated to the Salvation Army;the other items of property were donated to a Methodist Church seminary.Disregarding percentage limitations,Mel's charitable contribution deduction for the year is:

A)$43,300.
B)$42,900.
C)$41,300.
D)$26,300.
E)None of the above.

Question 74

During 2010,Sam,a self-employed individual,paid the following amounts: What amount can Sam claim as taxes in itemizing deductions from AGI?

A)$6,600.
B)$6,950.
C)$7,200.
D)$8,600.
E)None of the above.

Question 75

In 2010,Roseann makes the following donations to qualified charitable organizations: The ABC stock and the inventory were given to Roseann's church,and the comic book collection was given to the United Way.Both donees promptly sold the property for the stated fair market value.Disregarding percentage limitations,Roseann's charitable contribution deduction for 2010 is:

A)$14,000.
B)$25,600.
C)$26,000.
D)$33,600.
E)None of the above.

Question 76

David,a single taxpayer,took out a mortgage on his home for $300,000 nine years ago.In August of this year,when the home had a fair market value of $550,000 and he owed $225,000 on the mortgage,he took out a home equity loan for $350,000.David used the funds to purchase a yacht to be used for recreational purposes.What is the maximum amount of debt on which he can deduct home equity interest?

A)$50,000.
B)$100,000.
C)$325,000.
D)$350,000.
E)None of the above.

Question 77

Sarah,John's daughter who would otherwise qualify as his dependent,filed a joint return with her husband Larry.John,who had AGI of $100,000,paid the following medical expenses: John has a medical expense deduction of:

A)$1,600.
B)$5,000.
C)$9,100.
D)$12,500.
E)None of the above.

Question 78

Nancy paid the following taxes during the year: Nancy sold her personal residence on June 30,under an agreement in which the real estate taxes were not prorated between the buyer and the seller.What amount qualifies as a deduction from AGI for Nancy?

A)$9,180.
B)$9,130.
C)$7,382.
D)$5,382.
E)None of the above.

Question 79

Karen,a calendar year taxpayer,made the following donations to qualified charitable organizations in the current year: The land had been held as an investment and was acquired 4 years ago.Shortly after receipt,the city of Terre Haute sold the land for $210,000.Karen's AGI is $450,000.The allowable charitable contribution deduction is:

A)$84,000 if the reduced deduction election is not made.
B)$100,000 if the reduced deduction election is not made.
C)$165,000 if the reduced deduction election is not made.
D)$170,000 if the reduced deduction election is made.
E)None of the above.

Question 80

Your friend Scotty informs you that he received a "tax-free" reimbursement in 2010 of some medical expenses he paid in 2009.Which of the following statements best explains why Scotty is not required to report the reimbursement in gross income?

A)Scotty itemized deductions in 2009.
B)Scotty did not itemize deductions in 2009.
C)Scotty itemized deductions in 2010.
D)Scotty did not itemize deductions in 2010.
E)Scotty itemized deductions in 2010 but not in 2009.