Deck 5: Itemized Deductions and Other Incentives

Question 1

If a taxpayer contributes a painting to a museum but reserves the right to use the painting for parties, he may not be allowed a deduction for the charitable contribution.

Answer 1

True

Question 2

The cost of a fishing license is considered a personal property tax and is deductible as an itemized deduction.

Answer 2

False

Question 3

Individual taxpayers may carry forward indefinitely charitable contributions that are not allowed as a deduction in the current year due to the adjusted gross income limitation.

Answer 3

False

Question 4

To calculate the amount of state and local income taxes which may be deducted as an itemized deduction, state income taxes paid during the year must be reduced by state income tax refunds received during the year.

Question 5

The adjusted gross income (AGI) limitation on medical expenses is 15 percent.

Question 6

The amount of a special assessment charged to residents for the installation of sidewalks on their street is not deductible on Schedule A as property taxes.

Question 7

The cost of over-the-counter aspirin and decongestants is a deductible medical expense even though they are non-prescription drugs.

Question 8

In 2014, state income taxes may be deducted as an itemized deduction on Schedule A.

Question 9

Taxpayers must itemize their deductions to be allowed a charitable contribution deduction.

Question 10

Casualty and theft losses must be reduced by amounts recovered from insurance coverage.

Question 11

To deduct interest paid with respect to indebtedness, the taxpayer must be legally liable for the debt.

Question 12

Mortgage interest on a taxpayer's personal residence is not deductible on Schedule A.

Question 13

For 2014, the investment interest expense deduction is limited to the taxpayer's net investment income.

Question 14

The cost of a chiropractor's services qualifies as a medical deduction.

Question 15

If business property is fully destroyed as a result of a casualty, the loss is equal to the decrease in the fair market value of the property.

Question 16

If personal property is completely destroyed, the casualty loss deduction is still reduced by a floor amount.

Question 17

Premiums paid for life insurance policies are deductible as medical expenses.

Question 18

The interest paid on a loan used to acquire municipal bonds is not deductible.

Question 19

A taxpayer may donate the free use of property to a charitable organization and deduct the value as an itemized deduction.

Question 20

If real property is sold during the year, the property taxes must be allocated between the buyer and seller based on the number of days the property was held by each party.

Question 21

Unreimbursed employee business expenses are miscellaneous itemized deductions, subject to the 2 percent of adjusted gross income limitation.

Question 22

If a ballet dancer seeks work as a ditch digger, the expenses of job hunting may be deductible.

Question 23

An employee may deduct the cost of welder's safety goggles used at work as a miscellaneous itemized deduction.

Question 24

During 2014, Mary paid the following expenses: What is the total amount of medical expenses (before considering the limitation based on adjusted gross income) that would enter into the calculation of itemized deductions on Mary's 2014 income tax return?

A)$700
B)$1,190
C)$1,450
D)$1,580
E)None of the above

Question 25

The expense of a review course for a state real estate agent's exam is deductible as a miscellaneous itemized deduction by a taxpayer attempting to become an agent.

Question 26

The cost of an appraisal of a painting may be deducted if the purpose of the appraisal is related to the preparation of an income tax return.

Question 27

Itemized deductions are subject to a phase-out based on AGI for certain high-income taxpayers.

Question 28

Educational expenses are deductible as a miscellaneous itemized deduction even if the education is required to meet the minimum requirements for the taxpayer's current job.

Question 29

Roberto, age 50, has AGI of $112,000 for 2014. He has medical expenses of $12,800. How much of the medical expenses can Roberto deduct on his Schedule A for 2014?

A)$0
B)$1,000
C)$1,280
D)$1,600
E)None of the above is correct

Question 30

All personal casualty losses incurred during the year are added together and only one $100 floor amount is used to reduce the casualty deduction.

Question 31

A theft loss is deductible in the year the theft is discovered, even if the theft occurred in a prior year.

Question 32

Which of the following is not considered a deductible medical expense?

A)A face lift
B)Eye exams
C)Prescription drugs
D)Medical insurance

Question 33

Jon, age 45, had adjusted gross income of $26,000 in 2014. During the year, he incurred and paid the following medical expenses: Jon received $900 in 2014 as a reimbursement for a portion of the doctors' fees. If Jon were to itemize his deductions, what would be his allowable medical expense deduction after the adjusted gross income limitation is taken into account?

A)$0
B)$425
C)$600
D)$1,000
E)None of the above

Question 34

In 2014, David, age 65, had adjusted gross income of $31,000. During the year he paid the following medical expenses: What amount can David deduct as medical expenses (after the adjusted gross income limitation) in calculating his itemized deductions for 2014?

A)$0
B)$100
C)$875
D)$3,200
E)None of the above

Question 35

If an employee receives a reimbursement for employee business expenses, the amount of the reimbursement is always excluded from gross income and the expenses are deductible as deductions for adjusted gross income.

Question 36

Expenses of education to improve or maintain existing skills are deductible as a miscellaneous itemized deduction even if the education incidentally leads to qualification in a new job or business.

Question 37

Randy is advised by his physician to install an elevator in his residence, since he is afflicted with heart disease. The cost of installing the elevator is $10,000 and it has an estimated useful life of 10 years. He installs the elevator in January of 2014, and it increases the value of his residence by $8,000. Disregarding the limitation based on adjusted gross income, how much of the cost of the elevator may Randy take into account in determining his medical expense deduction for 2014?

A)$0
B)$750
C)$2,000
D)$10,000
E)None of the above

Question 38

Which of the following is not deductible as a medical expense on Schedule A?

A)Payments to a nurse
B)Payments for marriage counseling
C)Payments for dentures
D)Payments for psychiatric care
E)All of the above are deductible as medical expenses

Question 39

The cost of uniforms is deductible only by self-employed taxpayers.

Question 40

If the taxpayer fails to locate a job, job hunting expenses are not deductible.

Question 41

During 2014, Seth, a self-employed individual, paid the following taxes: What amount can Seth claim as an itemized deduction for taxes paid during 2014, assuming he elects to deduct state and local income taxes?

A)$2,400
B)$3,300
C)$4,200
D)$5,000
E)None of the above

Question 42

Which of the following is not an itemized deduction?

A)Medical expenses
B)IRA contribution deduction
C)Personal property taxes
D)Union dues
E)All of the above are itemized deductions

Question 43

Frank is a resident of a state that imposes a tax on income. The following information pertaining to Frank's state income taxes is available: What amount should Frank use as state and local income taxes in calculating itemized deductions for his 2014 Federal tax return, assuming he elects to deduct state and local income taxes?

A)$3,500
B)$3,700
C)$4,100
D)$4,200
E)None of the above

Question 44

What is the maximum amount of home equity debt (not acquisition debt) on which interest is fully deductible?

A)$0
B)$50,000
C)$100,000
D)$200,000
E)None of the above

Question 45

During 2014, George, a salaried taxpayer, paid the following taxes which were not incurred in connection with a trade or business: What amount can George claim for 2014 as an itemized deduction for the taxes paid, assuming he elects to deduct state and local income taxes?

A)$1,100
B)$1,150
C)$1,400
D)$2,000
E)None of the above

Question 46

Amy paid the following interest expense during 2014: What is the amount of Amy's interest deduction for 2014?

A)$3,000
B)$4,000
C)$12,300
D)$16,300
E)None of the above

Question 47

During the current year, Cary and Bill incurred acquisition debt on their residence of $1,300,000 and a home equity loan of $200,000. On a joint tax return, what is the amount of their qualified acquisition debt and qualified home equity debt, respectively?

A)$900,000 and $100,000
B)$1,000,000 and $0
C)$1,000,000 and $100,000
D)$1,300,000 and $200,000
E)None of the above

Question 48

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

A)State income taxes
B)Personal property taxes
C)Charitable contributions
D)Local income taxes
E)All of the above may be deductible as itemized deductions

Question 49

Bill has a mortgage loan on his personal residence. He decides to pay 24 months of interest in advance on July 1, 2014. The total advanced interest payment is $60,000. How much of the advance interest payment can he deduct in 2014?

A)$60,000.
B)$30,000.
C)$15,000.
D)Mortgage interest is not deductible.
E)If a taxpayer makes an advance payment, he may not deduct any interest.

Question 50

For the year ended December 31, 2014, David, a married taxpayer filing a joint return, reported the following: What is the maximum amount that David can deduct in 2014 as investment interest expense?

A)$7,000
B)$20,000
C)$21,000
D)$24,000
E)None of the above

Question 51

During 2014, Mr. and Mrs. West paid the following taxes: What amount can the Wests deduct as property taxes in calculating itemized deductions for 2014?

A)$1,300
B)$1,800
C)$3,100
D)$4,100
E)None of the above

Question 52

Which of the following interest expense amounts is not deductible in 2014?

A)Education loan interest of $2,000, assuming the taxpayer is single and has income of $150,000.
B)Home equity loan interest of $9,000 on a loan of $100,000, the proceeds of which were used to purchase a motor home.
C)Investment interest expense of $10,000, assuming the taxpayer has $15,000 of investment income.
D)Points of $2,000 paid on a mortgage loan for the purchase of a new principal residence.

Question 53

Jerry and Ann paid the following amounts during 2014: What is the maximum amount they can use as interest expense in calculating itemized deductions for 2014?

A)$3,000
B)$3,150
C)$4,500
D)$8,000
E)None of the above

Question 54

Which of the following taxes is not deductible as an itemized deduction?

A)Property tax on second residence
B)Sales tax in a state with no income tax
C)Federal income tax
D)State income tax

Question 55

Harvey itemized deductions on his 2013 income tax return. Harvey plans to itemize deductions again in 2014 and the following information is available regarding state and local income taxes: Assuming he elects to deduct state and local income taxes, the above information should be reported by Harvey in his 2014 tax return as:

A)Itemized deduction for state and local income taxes of $2,500, and income from state and local tax refund of $200
B)Itemized deduction for state and local income taxes of $2,300
C)Itemized deduction for state and local income taxes of $2,800
D)Itemized deduction for state and local income taxes of $2,800 and income from state and local tax refund of $500
E)None of the above

Question 56

Which one of the following is not tax deductible?

A)Real estate taxes
B)Property taxes
C)Local income taxes
D)State income taxes
E)All of the above are tax deductible

Question 57

Shellie, a single individual, received her Bachelor's degree in 2013, and took a job with a salary of $45,000 per year. In 2014, she began paying interest on qualified education loans. She was able to pay $1,500 in 2014. Which of the following statements is not correct?

A)The full $1,500 is deductible in arriving at adjusted gross income (AGI).
B)If her payment had been $3,000, only $2,500 would have been deductible in arriving at AGI and the $500 excess would have been treated as nondeductible consumer interest.
C)If her income had been $80,000, the deductible amount would have been phased out.
D)Taxpayers are not allowed a deduction for education loan interest in 2014.

Question 58

Matthew purchases a new principal residence in 2014 and pays points of $2,000 to obtain a mortgage loan. What is the proper tax treatment for the points paid?

A)The points are a nondeductible personal expense.
B)The points must be amortized over the life of the loan.
C)The points are fully deductible in 2014.
D)The points must be capitalized into the cost of the residence.
E)The points must be amortized over 5 years.

Question 59

Margo has $2,100 withheld from her wages for state income taxes during 2014. In March of 2014, she paid $400 in additional taxes for her 2013 state tax return. Her state income tax liability for 2014 is $2,600 and she pays the additional $500 when she files her 2014 state tax return in April of 2015. What amount should Margo deduct as an itemized deduction for state income taxes on her 2014 federal income tax return, assuming she elects to deduct state and local income taxes?

A)$2,100
B)$2,500
C)$2,600
D)$3,000
E)None of the above

Question 60

Weber resides in a state that imposes a tax on income. The following information relating to Weber's state income taxes is available: Assuming he elects to deduct state and local income taxes, what amount should Weber use as state and local income taxes in calculating itemized deductions for his 2014 Federal income tax return?

A)$2,700
B)$3,000
C)$3,500
D)$3,800
E)None of the above

Question 61

Carla is a high school teacher who is required by her school district to take continuing education courses which are offered at the local college. She is also in the process of taking classes at a different university where she is pursuing her Ph.D. to become a research specialist. She pays the tuition for both schools. Which of the following is true?

A)She may deduct all of the tuition from each school because they are education expenses related to job skill improvement.
B)She may not deduct tuition from either school.
C)She may not deduct the continuing education tuition because it is required by her job.
D)She may deduct the continuing education tuition from the local college because it meets her employer's requirement to maintain her current job skills.
E)None of the above is correct.

Question 62

Stewart had adjusted gross income of $24,000 in 2014. During the year, he made the following contributions to qualified charities: ​
$8,000 cash
​
1,000 shares of Able Corporation common stock, acquired in 1979 (cost and fair market value of $7,000)
​
Considering the charitable contribution deduction limitation, what amount can Stewart claim as a deduction for charitable contributions in 2014?

A)$7,200
B)$8,000
C)$12,000
D)$15,000
E)None of the above

Question 63

Which of the following miscellaneous deductions is subject to the 2 percent of adjusted gross income limitation?

A)Unreimbursed employee business expenses
B)Gambling losses to the extent of gambling winnings
C)Handicapped impairment related work expenses
D)None of the above
E)All of above

Question 64

Which of the following charitable contributions is not tax deductible?

A)Cash donated to a qualified church.
B)Clothing donated to a qualified veterans' organization.
C)Time donated to a qualified veterans' organization.
D)Donation of a car to a qualified non-profit organization.
E)All of the above are tax deductible.

Question 65

Peter is a plumber employed by a major contracting firm. During 2014, he paid the following miscellaneous expenses: If Peter were to itemize his deductions for 2014, what amount could he claim as miscellaneous itemized deductions (before applying the 2 percent of adjusted gross income limitation)?

A)$100
B)$550
C)$1,070
D)$1,150
E)None of the above

Question 66

Which of the following is deductible as a miscellaneous itemized deduction?

A)Union dues
B)Professional dues and subscriptions
C)Job hunting expenses
D)Investment expenses
E)All of the above are miscellaneous deductions

Question 67

Harris had adjusted gross income in 2014 of $128,000. During the year his personal summer home was almost completely destroyed by a cyclone. Pertinent data with respect to the home follows: Harris was partially insured for his loss and in 2014 he received a $113,000 insurance settlement. What is Harris' allowable casualty loss deduction for 2014?

A)$4,100
B)$4,200
C)$9,100
D)$9,200
E)None of the above

Question 68

Charles, a corporate executive, incurred business related, unreimbursed expenses in 2014 as follows: Assuming that Charles itemizes his deductions, how much of these expenses should he deduct on his 2014 Schedule A, before considering the 2 percent of adjusted gross income limitation?

A)$400
B)$700
C)$1,100
D)$1,650
E)None of the above

Question 69

Jean's employer has an accountable plan for reimbursing employee expenses. Jean is reimbursed for $1,500 of business travel and $500 for various business subscriptions and professional dues. The $2,000 reimbursement should be treated as follows:

A)$2,000 of income to Jean should be reported
B)Income to Jean and a corresponding miscellaneous deduction for Jean, subject to the 2 percent of AGI floor
C)No taxable income should be reported to Jean
D)$500 of income should be reported to Jean

Question 70

What income tax form does an employee use to report business expenses that are not reimbursed by an employer under an accountable plan?

A)Form 2106, Employee Business Expenses
B)No form, the expenses are not deductible by the employee
C)Schedule D
D)Schedule R
E)Schedule C

Question 71

Which of the following types of interest is not deductible in 2014?

A)Qualified mortgage interest on residence
B)Qualified mortgage interest on second residence
C)Credit card interest
D)All of the above
E)None of the above

Question 72

Which of the following miscellaneous deductions are not subject to the 2 percent of adjusted gross income limitation?

A)Unreimbursed employee business expenses
B)Investment expenses
C)Union dues
D)Gambling losses to the extent of gambling winnings
E)None of the above

Question 73

An accountable expense reimbursement plan:

A)Requires the employee only to substantiate expenses with receipts.
B)Does not require the employee to return any excess reimbursement.
C)Requires the employee to report business expenses as itemized deductions.
D)Requires the employee to substantiate expenses with receipts and to return any excess reimbursement.

Question 74

Christine saw a television advertisement asking for donations of used vehicles to a charitable foundation and decided to donate her old car. Which of the following statements is correct?

A)She can take a tax deduction large enough on an after-tax basis to equal the amount she would have received if she sold the car directly.
B)She can take a deduction greater than the amount for which the charity actually sells the vehicle.
C)She can claim an estimated value for the auto if the charity uses it rather than selling it.
D)The charity is not required to provide her with any information about what they do with the auto.

Question 75

Which of the following is not deductible as interest expense on Schedule A?

A)Loan fee charged for appraisal service
B)Home mortgage interest
C)Mortgage interest on a second residence
D)Home mortgage prepayment penalties
E)All of the above are deductible as interest expense

Question 76

Damage resulting from which of the following would probably not give rise to a casualty loss deduction?

A)Automobile accident
B)Earthquake
C)Flood
D)Rust
E)Fire

Question 77

For 2014, Eugene and Linda had adjusted gross income of $30,000. Additional information for 2014 is as follows: What is the maximum amount that they can use as a deduction for charitable contributions for 2014?

A)$475
B)$1,575
C)$1,900
D)$3,175
E)None of the above

Question 78

Which one of the following is not considered a casualty or theft loss for tax purposes?

A)A taxpayer's car is crushed by a tree during a storm.
B)A taxpayer's residence is burned down during a wild fire.
C)A taxpayer's car is destroyed by rust.
D)A taxpayer's bicycle is vandalized by local teenagers.
E)All of the above are casualty or theft losses.

Question 79

Catherine is a CPA employed by a large accounting firm in San Francisco. In 2014, she paid the following amounts: How much may she deduct on Schedule A as a miscellaneous deduction, before considering the 2 percent of adjusted gross income limitation?

A)$275
B)$345
C)$775
D)$975
E)None of the above

Question 80

Which of the following is a miscellaneous itemized deduction?

A)Casualty losses
B)Job hunting expenses
C)Auto registration fees
D)Property taxes