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Exam 6: Individual Deductions

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Question 61

Multiple Choice

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Han is a self-employed carpenter and his wife, Christine, works full time as a grade school teacher. Han paid $525 for carpentry tools and supplies, and Christine paid $3,600 as her share of health insurance premiums (not with pretax dollars) for Han and herself in a qualified plan provided by the school district (not through an exchange) . Which of the following is a true statement?

A) The tools and supplies are deductible for AGI while the health insurance is an itemized deduction
B) Both expenditures are deductible for AGI
C) The tools and supplies are an itemized deduction but the health insurance is deductible for AGI
D) Both expenditures are itemized deductions
E) Neither of the expenditures is deductible.

F) A) and C)
G) All of the above

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Question 62

True/False

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For married taxpayers filing separately, excess business losses are defined as aggregate business deductions over the sum of aggregate business gross income or gain of the taxpayer plus $259,000.

A) True
B) False

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Question 63

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Scott is a self-employed plumber and his wife, Emily, is a full-time employee for a university. Emily has health insurance from a qualified plan provided by the university, but Scott has chosen to purchase his own health insurance rather than participate in Emily's plan. Besides paying $5,440 for his health insurance premiums, Scott also pays the following expenses associated with his plumbing business: What is the amount of deductions for AGI that Scott can claim this year (2020)?

Self-employed taxpayers can choose between claiming a deduction or a credit for the employer portion of self-employment taxes paid.

The deduction for investment interest in excess of the net investment income carries forward to the subsequent year.

An individual who forfeits a penalty for prematurely withdrawing a certificate of deposit (CD)is allowed to net the penalty against the interest income from the CD, reducing the amount of gross income reported.

Which of the following costs is NOT deductible as an itemized medical expense?

Rachel is an engineer who practices as a sole proprietor. This year, Rachel had net business income of $500,000 (net of the deduction for self-employment taxes, the self-employed health insurance deduction, and the deduction for contributions to qualified self-employment retirement plans)from her business. Assume that Rachel pays $20,000 wages to her employees, she has $500,000 of property (unadjusted basis of equipment she purchased last year), she has no capital gains, her taxable income before the deduction for qualified business income is $380,000, and she is unmarried. Calculate Rachel's deduction for qualified business income.

Tita, a married taxpayer filing jointly, has a $700,000 business loss from her S corporation. Assume the $700,000 loss satisfies the basis, at-risk amount, and passive loss rules. Assume also that neither she nor her husband has any other business losses or business income. How much of the $700,000 loss may she deduct this year?

Which of the following is a true statement?

Last year Henry borrowed $22,000 to help pay for his dependent daughter's college tuition. This year Henry paid $3,200 of interest on the loan. How much, if any, interest can Henry deduct if he files single with AGI of $77,800?

Rental or royalty expenses are deductible "for" AGI.

Brice is a single, self-employed electrician who earns $60,000 per year in self-employment income. Brice paid the following expenses this year. Which of the expenses are deductible for AGI?The cost of health insurance (not purchased through an exchange) The employer portion of self-employment tax paidPenalty on early withdrawal of funds from a certificate of deposit

When taxpayers donate cash and capital gain property to a public charity, the AGI percentage limitation is applied in the following order in 2020:

Which of the following is a true statement?

Taxpayers are allowed to deduct mortgage interest on up to $1,000,000 of acquisition debt for their qualified residence if the acquisition debt is incurred after December 15, 2017.

This fall Millie finally repaid her student loan. She originally borrowed the money to pay tuition several years ago, when she attended State University (a qualified educational institution) . This year Millie paid a total of $2,400 of interest on the loan. If Millie files single and reports $75,000 of income and no other items of income or expense, how much of the interest can she deduct?