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Exam 10: Deductions and Losses: Certain Itemized Deductions

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Question 31

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

A) True
B) False

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Question 32

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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.

A) True
B) False

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Question 33

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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?

In 2012,Rhonda received an insurance reimbursement for medical expenses incurred in 2011.She is not required to include the reimbursement in gross income in 2012 if she claimed the standard deduction in 2011.

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.

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.

In 2011,Dorothy drove 500 miles to volunteer in a project sponsored by a qualified charitable organization in New Mexico.In addition,she spent $200 for meals while away from home.Dorothy may take a charitable contribution deduction of $270 [$200 + (500 miles ´ $.14)].

In 2011,Brandon,age 72,paid $3,000 for long-term care insurance premiums.He may include the $3,000 in computing his medical expense deduction for the year.

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.

During 2011,Ralph made the following contributions to the University of Oregon (a qualified charitable organization) : Ralph acquired the stock in Raptor,Inc.,as an investment fourteen months ago at a cost of $42,000.Ralph's AGI for 2011 is $189,000.What is Ralph's charitable contribution deduction for 2011?

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?

During 2011,Clara,who is self-employed,paid $500 per month for an HSA contract that provides medical insurance coverage with a $3,600 deductible.The plan covers Clara,her husband,and their three children.Of the $500 monthly fee,$200 was for the high-deductible policy,and $300 was deposited into an HSA.How much of the amount paid for the high-deductible policy can Clara deduct as a deduction for AGI?

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.

Dirk,who uses the cash method of accounting,lives in a state that imposes an income tax (including withholding from wages) .On April 14,2011,he files his state return for 2010,paying an additional $800 in state income taxes.During 2011,his withholdings for state income tax purposes amount to $4,550.On April 13,2012,he files his state return for 2011,claiming a refund of $900.Dirk receives the refund on August 3,2012.If he itemizes deductions,how much may Dirk claim as a deduction for state income taxes on his Federal income tax return for calendar year 2011 (filed in April 2012) ?

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.

The City of Ogden was devastated by a tornado in April 2011,leaving many families in need of food,clothing,shelter,and other necessities.Betty contributed $500 to a family whose home was completely destroyed by the tornado.Jack contributed $700 to the family's church,which gave the money to the family.Discuss the deductibility of these contributions.

Tom is advised by his family physician that he needs back surgery to correct a problem from his last back surgery.Since Tom is in a wheel chair,he needs his wife,Jean,to accompany him on his trip to Rochester,Minnesota,for in-patient treatment at the Mayo Clinic,which specializes in this type of surgery.Tom incurred the following costs: Compute Tom's medical expenses for the trip (subject to the 7.5% floor) .

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.

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.

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