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Exam 5: Itemized Deductions and Other Incentives

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Question 21

True/False

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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.

A) True
B) False

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Question 22

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Jon,age 45,had adjusted gross income of $25,000 in 2013.During the year,he incurred and paid the following medical expenses: Drugs and medicines prescribed by doctors $\quad \$ 300$ Health insurance premiums $\quad \$ 750$ Doctors' fees $\quad \$ 2,250$ Eyeglasses $\$ \quad 75$ Jon received $900 in 2013 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

F) B) and E)
G) B) and D)

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Question 23

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Charles,a corporate executive,incurred business related,unreimbursed expenses in 2013 as follows: $\begin{array} { l l } \text { Entertainment } & \$ 900 \\\text { Transportation } & \$ 700 \\\text { Education } & \$ 400\end{array}$ Assuming that Charles itemizes his deductions,how much of these expenses should he deduct on his 2013 Schedule A,before considering the 2 percent of adjusted gross income limitation?

Which of the following is true with respect to an education incentive?

Ellen and Rick are married with one dependent child.They have AGI of $350,000,and itemized deductions consisting of $20,000 state income taxes and $20,000 medical expenses,after applying the 10 percent of AGI limitation. Compute the following for 2013: a.Itemized deductions allowed after the phase-out for high-income taxpayers. b.Exemption deductions ordinarily $3,900 x 3)after the high-income phase-out. c.Taxable income.

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

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?

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

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

Harris had adjusted gross income in 2013 of $130,000.During the year his personal summer home was almost completely destroyed by a cyclone.Pertinent data with respect to the home follows: $\begin{array}{ll}\text { Cost basis } & \$ 139,000 \\\text { Value before casualty } & \$ 145,000 \\\text { Value after casualty } & \$ 13,000\end{array}$ Harris was partially insured for his loss and in 2013 he received a $115,000 insurance settlement.What is Harris' allowable casualty loss deduction for 2013?

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

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

Steve keeps a valuable bonsai collection in his back yard.In 2013,thieves disarmed his security system and stole several of the bonsai.The stolen bonsai had a fair market value and adjusted basis of $4,500.Assuming that Steve had no insurance coverage on the bonsai and his adjusted gross income for 2013 is $30,000,calculate the amount of his theft loss deduction.

In 2013,Jennie receives $12,000 of which $3,000 is earnings) from a Qualified Tuition Program.She uses the funds to pay for new furniture for her apartment.What amount is taxable to Jennie?

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

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

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: State income taxes withheld in $2013 \quad\quad \$ 3,500$ Refund of $2012 \operatorname { tax }$ received in $2013 \quad \quad \$ 400$ Deficiency assessed and paid in 2013 for 2011 : $\operatorname { Tax } \quad \quad \$ 600$ Interest $\quad \$ 100$ What amount should Frank use as state and local income taxes in calculating itemized deductions for his 2013 Federal tax return,assuming he elects to deduct state and local income taxes?

During 2013,Hom donates a sculpture that cost $1,000 to a museum for exhibition.The sculpture's fair market value was $1,500 on the date of the donation,and Hom's adjusted gross income is $40,000. a.If Hom had held the sculpture for 4 months and the $500 $1,500 - $1,000)of appreciation would have been a short-term capital gain,calculate the amount of his itemized deduction for the contribution. b.If Hom had held the sculpture for 2 years and the $500 gain would have been a long-term capital gain,calculate the amount of his itemized deduction for the contribution.

April and Wilson are married and file a joint tax return.Wilson is a police officer,and in the current tax year he spends $375 on uniforms and $150 for dry cleaning the uniforms.April is in the National Guard and military regulations restrict her from wearing her uniforms when she is off duty.The cost of uniforms for the year was $225 and the cost of dry cleaning them amounted to $75.April was granted a uniform allowance of $200 for the year.She also purchased a pair of standard black shoes to wear while on duty that cost $45.How much may they deduct on Schedule A for special clothing and uniforms,before considering the 2 percent of adjusted gross income limitation?

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