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Exam 10: Deductions and Losses: Certain Itemized Deductions

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Question 31

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Trent sells his personal residence to Chester on July 1, 2017. He had paid $7,000 in real property taxes on March 1, 2017, the due date for property taxes for 2017. Trent may not deduct the portion of the taxes he paid for the period the property was owned by Chester.

A) True
B) False

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Question 32

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Ronaldo contributed stock worth $12,000 to the Children's Protective Agency, a qualified charity. He acquired the stock 20 months ago for $7,000. He may deduct $7,000 as a charitable contribution deduction (subject to percentage limitations).

A) True
B) False

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Question 33

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Ross, who is single, purchased a personal residence eight years ago for $170,000 and took out a mortgage of $100,000 on the property. In May of the current year, when the residence had a fair market value of $220,000 and Ross owed $70,000 on the mortgage, he took out a home equity loan for $110,000. He used the funds to purchase a BMW for himself and a Lexus SUV for his wife. For both vehicles, 100% of the use is for personal activities. What is the maximum amount on which Ross can deduct home equity interest?

Marilyn, age 38, is employed as an architect. For calendar year 2017, she had AGI of $204,000 and paid the following medical expenses: ​ Peter and Esther would qualify as Marilyn's dependents except that they file a joint return. Marilyn's medical insurance policy does not cover them. Marilyn filed a claim for reimbursement of $6,000 of her own expenses with her insurance company in December 2017 and received the reimbursement in January 2018. What is Marilyn's maximum allowable medical expense deduction for 2017?

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.

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

Tom, age 48, 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 in 2017: ​ Compute Tom's medical expenses for the trip (subject to the 10%-of-AGI floor) .

Quinn, who is single and lives alone, is physically handicapped as a result of a diving accident. In order to live independently, he modifies his personal residence at a cost of $30,000. 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. Quinn pays $200 for an appraisal that places the value of the residence at $129,000 before the improvements and $140,000 after. As a result of the operation of the stairway lift, Quinn experienced an increase of $680 in his utility bills for the current year. Disregarding the 10%-of-AGI floor, how much of the above expenditures qualify as medical expense deductions?

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).

Jack sold a personal residence to Steven and paid points of $3,500 on the loan to help Steven finance the purchase. Jack can deduct the points as interest.

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.

In 2017, Dena traveled 600 miles for specialized medical treatment that was not available in her hometown. She paid $90 for meals during the trip, $145 for a hotel room for one night, and $15 in parking fees. She did not keep records of other out-of-pocket costs for transportation. Dena can include $167 in computing her medical expenses.

Nancy paid the following taxes during the year: ​ Nancy sold her personal residence on June 30 of this year 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?

Matt, a calendar year taxpayer, pays $11,000 in medical expenses in 2017. He expects $5,000 of these expenses to be reimbursed by an insurance company in 2018. In determining his medical expense deduction for 2017, Matt must reduce his 2017 medical expenses by the amount of the reimbursement he expects in 2018.

Maria traveled to Rochester, Minnesota, with her son, who had surgery at the Mayo Clinic. Her son stayed at the clinic for the duration of his treatment. She paid airfare of $300 and $50 per night for lodging. The cost of Maria's airfare and lodging cannot be included in determining her medical expense deduction.

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.

Barry and Larry, who are brothers, are equal owners in Chickadee Corporation. On July 1, 2017, each loans the corporation $10,000 at an annual interest rate of 10%. Both shareholders are on the cash method of accounting, while Chickadee Corporation is on the accrual method. All parties use the calendar year for tax purposes. On June 30, 2018, Chickadee repays the loans of $20,000 together with the specified interest of $2,000. How much of the interest can Chickadee Corporation deduct in 2017?

In 2017, Boris pays a $3,800 premium for high-deductible medical insurance for himself and his family. In addition, he contributes $3,400 to a Health Savings Account. Which of the following statements is true?

Fred and Lucy are married, ages 33 and 32, and together have AGI of $120,000 in 2017. They have four dependents and file a joint return. They pay $5,000 for a high deductible health insurance policy and contribute $2,600 to a qualified Health Savings Account. During the year, they paid the following amounts for medical care: $9,200 in doctor and dentist bills and hospital expenses, and $3,000 for prescribed medicine and drugs. In October 2017, they received an insurance reimbursement of $4,400 for the hospitalization. They expect to receive an additional reimbursement of $1,000 in January 2018. Determine the maximum itemized deduction allowable for medical expenses in 2017.

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.