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Exam 10: Deductions and Losses: Certain Itemized Deductions

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Question 1

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A physician recommends a private school for Ellen's dependent child.Because of the physician's recommendation, the cost of the private school will qualify as a medical expense deduction (subject to percentage limitations).

A) True
B) False

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False

Question 2

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

A) True
B) False

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Question 3

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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.

Dan contributed stock worth $16,000 to his college alma mater, a qualified charity.He acquired the stock 11 months ago for $4,000.He may deduct $16,000 as a charitable contribution deduction (subject to percentage limitations).

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

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.

On 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.

In 2019, Brandon, age 72, paid $5,000 for long-term care insurance premiums.He may include the $5,000 in computing his medical expense deduction 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.

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 2019 was $75,000.How much of these expenditures can Phillip deduct as a medical expense in 2019?

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

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.

During 2019, 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?

Joe, a cash basis taxpayer, took out a 12-month business loan on December 1, 2019.He prepaid all $3,600 of the interest on the loan on December 1, 2019.Joe can deduct only $300 of the prepaid interest in 2019.

Jim's employer pays half of the premiums on a group medical insurance plan covering all employees, and employees pay the other half.Jim can exclude the half of the premium paid by his employer from his gross income and may include the half he pays in determining his medical expense deduction.

Brad, who uses the cash method of accounting, lives in a state that imposes an income tax (including withholding from wages) .On April 14, 2019, he files his state return for 2018, paying an additional $600 in state income taxes.During 2019, his withholdings for state income tax purposes amount to $3,550.On April 13, 2020, he files his state return for 2019 claiming a refund of $800.Brad receives the refund on June 3, 2020.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 2019 (filed in April 2020) ?

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.

Trent sells his personal residence to Chester on July 1, 2019.He had paid $7,000 in real property taxes on March 1, 2019, the due date for property taxes for 2019.Trent may not deduct the portion of the taxes he paid for the period the property was owned by Chester.

Georgia contributed $2,000 to a qualifying Health Savings Account in the current year.The entire amount qualifies as an expense deductible for AGI.

Georgia had AGI of $100,000 in 2019.She donated Heron Corporation stock with a basis of $8,500 to a qualified charitable organization on July 5, 2019. a.What is the amount of Georgia's deduction, assuming that she purchased the stock on December 4, 2018, and that the stock had a fair market value of $15,000 when she made the donation? a.except that Georgia purchased the stock on July 1, 2011. a.except that the stock had a fair market value of $6,000 (rather than $15,000) when Georgia donated it to the charity. b.Assume the same facts as in c.Assume the same facts as in