CHAPTER 10--DEDUCTIONS AND LOSSES: CERTAIN ITEMIZED DEDUCTIONS

Student: ___________________________________________________________________________

1. Personal expenditures that are deductible as itemized deductions include medical expenses, Federal income taxes, state income taxes, property taxes on a personal residence, mortgage interest, and charitable contributions.
True False

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

3. Adrienne sustained serious facial injuries in a motorcycle accident. To restore her physical appearance, Adrienne had cosmetic surgery. She cannot deduct the cost of this procedure as a medical expense.
True False

4. 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).
True False

5. 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.
True False

6. 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.
True False

7. Mason, age 70, a physically handicapped individual, pays $10,000 in 2013 for the installation of wheelchair ramps, support bars, and railings in his personal residence. These improvements increase the value of his personal residence by $2,000. Only $8,000 of the expenditure qualifies as a medical deduction (subject to the AGI floor).
True False

8. Chad pays the medical expenses of his son, James. James would qualify as Chad’s dependent except that he earns $7,500 during the year. Chad may claim James’ medical expenses even if he is not a dependent.
True False

9. Bill paid $2,500 of medical expenses for his daughter, Marie. Marie is married to John and they file a joint return. Bill can include the $2,500 of expenses when calculating his medical expense deduction.
True False

10. In 2013, 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 on Tuesday night, and $15 in parking fees. She did not keep records of other out-of-pocket costs for transportation. Dena can include $209 in computing her medical expenses.
True False

11. Maria traveled to Rochester, Minnesota, with her son, who was operated on 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.
True False

12. In 2013, 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.
True False

13. 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.
True False

14. Matt, a calendar year taxpayer, pays $11,000 in medical expenses in 2013. He expects $5,000 of these expenses to be reimbursed by an insurance company in 2014. In determining his medical expense deduction for 2013, Matt must reduce his 2013 medical expenses by the amount of the reimbursement he expects in 2014.
True False

15. In 2014, Rhonda received an insurance reimbursement for medical expenses incurred in 2013. She is not required to include the reimbursement in gross income in 2014 if she claimed the standard deduction in 2013.
True False

16. Georgia contributed $2,000 to a qualifying Health Savings Account in 2013. The entire amount qualifies as an expense deductible for AGI.
True False

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

18. Fees for automobile inspections, automobile titles and registration, bridge and highway tolls, parking meter deposits, and postage are not deductible if incurred for personal reasons, but they are deductible as deductions for AGI if incurred as a business expense by a self-employed taxpayer.
True False

19. A taxpayer may not deduct the cost of new curbing (relative to a personal residence), even if the construction is required by the city and the curbing provides an incidental benefit to the public welfare.
True False

20. 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 notdeduct $2,000 as a tax, but he may add the $2,000 to the basis of his property.
True False

21. Trent sells his personal residence to Chester on July 1, 2013. He had paid $7,000 in real property taxes on March 1, 2013, the due date for property taxes for 2013. Trent may not deduct the portion of the taxes he paid for the period the property was owned by Chester.
True False

22. Herbert is the sole proprietor of a furniture store. He can deduct real property taxes on his store building but he cannot deduct state income taxes related to his net income from the furniture store as a business deduction.
True False

23. 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.
True False

24. In April 2013, Bertie, a calendar year cash basis taxpayer, had to pay the state of Michigan additional income tax for 2012. Even though it relates to 2012, for Federal income tax purposes the payment qualifies as a tax deduction for tax year 2013.
True False

25. In January 2014, Pam, a calendar year cash basis taxpayer, made an estimated state income tax payment for 2013. The payment is deductible in 2013.
True False

26. Phyllis, a calendar year cash basis taxpayer who itemized deductions, overpaid her 2012 state income tax and is entitled to a refund of $400. Phyllis chooses to apply the $400 overpayment toward her state income taxes for 2013. She is required to recognize that amount as income in 2013.
True False

27. Tom, whose MAGI is $40,000, paid $3,500 of interest on a qualified student loan in 2013. Tom is single. He may deduct the $3,500 interest as an itemized deduction.
True False

28. For purposes of computing the deduction for qualified residence interest, a qualified residence includes only the taxpayer’s principal residence.
True False

29. For purposes of computing the deduction for qualified residence interest, a qualified residence includes the taxpayer’s principal residence and two other residences of the taxpayer or spouse.
True False

30. 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.
True False

31. A taxpayer pays points to obtain financing to purchase a second residence. At the election of the taxpayer, the points can be deducted as interest expense for the year paid.
True False

32. Points paid by the owner of a personal residence to refinance an existing mortgage must be capitalized and amortized over the life of the new mortgage.
True False

33. 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.
True False

34. Letha incurred a $1,600 prepayment penalty to a lending institution because she paid off the mortgage on her home early. The $1,600 is deductible as interest expense.
True False

35. Leona borrows $100,000 from First National Bank and uses the proceeds to purchase City of Houston bonds. The interest Leona pays on this loan is deductible as investment interest subject to the investment interest limits.
True False

36. Joe, a cash basis taxpayer, took out a 12-month business loan on December 1, 2013. He prepaid all $3,600 of the interest on the loan on December 1, 2013. Joe can deduct only $300 of the prepaid interest in 2013.
True False

37. Sadie mailed a check for $2,200 to a qualified charitable organization on December 31, 2013. The $2,200 contribution is deductible on Sadie’s 2013 tax return.
True False

38. On December 31, 2013, Lynette used her credit card to make a $500 contribution to the United Way, a qualified charitable organization. She will pay her credit card balance in January 2014. If Lynette itemizes, she can deduct the $500 in 2013.
True False

39. Judy paid $40 for Girl Scout cookies and $40 for Boy Scout popcorn. Judy may claim an $80 charitable contribution deduction.
True False

40. For all of the current year, Randy (a calendar year taxpayer) allowed the Salvation Army to use a building he owns rent-free. The building normally rents for $24,000 a year. Randy will be allowed a charitable contribution deduction this year of $24,000.
True False

41. Al contributed a painting to the Metropolitan Art Museum of St. Louis, Missouri. The painting, purchased six years ago, was worth $40,000 when donated, and Al’s basis was $20,000. If this painting is immediately sold by the museum and the proceeds are placed in the general fund, Al’s charitable contribution deduction is $20,000 (subject to percentage limitations).
True False

42. During the year, Victor spent $300 on bingo games sponsored by his church. If all profits went to the church, Victor has a charitable contribution deduction of $300.
True False

43. In 2013, Allison drove 800 miles to volunteer in a project sponsored by a qualified charitable organization in Utah. In addition, she spent $250 for meals while away from home. In total, Allison may take a charitable contribution deduction of $112 (800 miles ´ $.14).
True False

44. 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.
True False

45. In order to dissuade his pastor from resigning and taking a position with a larger church, Michael, an ardent leader of the congregation, gives the pastor a new car. The cost of the car is deductible by Michael as a charitable contribution.
True False

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

47. Ronaldo contributed stock worth $12,000 to the Children’s Protective Agency, a qualified charity. He acquired the stock twenty months ago for $6,000. He may deduct $6,000 as a charitable contribution deduction (subject to percentage limitations).
True False

48. Any capital asset donated to a public charity that would result in long-term capital gain if sold, is subject to the 30%-of-AGI ceiling limitation on charitable contributions for individuals.
True False

49. John gave $1,000 to a family whose house was destroyed by fire. John may claim a charitable deduction of $1,000 on his tax return for the current year.
True False

50. In the year of her death, Maria made significant charitable contributions of capital gain property. In fact, the amount of the contributions exceeds 30% of her AGI. Maria’s executor can elect to deduct charitable contributions of up to 50% of Maria’s AGI on Maria’s final income tax return.
True False

51. The reduced deduction election enables a taxpayer to move from the 30%-of-AGI limitation to the 50%-of-AGI limitation.
True False

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

53. Contributions to public charities in excess of 50% of AGI may be carried back 3 years or forward for up to 5 years.
True False

54. Employee business expenses for travel qualify as itemized deductions subject to the 2% floor if they are not reimbursed.
True False

55. Gambling losses may be deducted to the extent of the taxpayer’s gambling winnings. Such losses are subject to the 2% floor for miscellaneous itemized deductions.
True False

56. The phaseout of certain itemized deductions has been reinstated for years beginning in 2013.
True False

57. Edna had an accident while competing in a rodeo. She sustained facial injuries that required cosmetic surgery. While having the surgery done to restore her appearance, she had additional surgery done to reshape her chin, which was not injured in the accident. The surgery to restore her appearance cost $9,000 and the surgery to reshape her chin cost $6,000. How much of Edna’s surgical fees will qualify as a deductible medical expense (before application of the AGI limitation)?
A. $0.
B. $6,000.
C. $9,000.
D. $15,000.
E. None of the above.

58. Fred and Lucy are married, ages 33 and 32, and together have AGI of $120,000 in 2013. 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 2013, they received an insurance reimbursement of $4,400 for the hospitalization. They expect to receive an additional reimbursement of $1,000 in January 2014. Determine the maximum deduction allowable for medical expenses in 2013.
A. $800.
B. $3,400.
C. $9,200.
D. $12,800.
E. None of the above.

59. Richard, age 50, is employed as an actuary. For calendar year 2013, he had AGI of $130,000 and paid the following medical expenses:

Medical insurance premiums	$5,300
Doctor and dentist bills for Derrick and Jane (Richard’s parents)	7,900
Doctor and dentist bills for Richard	5,100
Prescribed medicines for Richard	830
Nonprescribed insulin for Richard	960

Derrick and Jane would qualify as Richard’s dependents except that they file a joint return. Richard’s medical insurance policy does not cover them. Richard filed a claim for $4,800 of his own expenses with his insurance company in November 2013 and received the reimbursement in January 2014. What is Richard’s maximum allowable medical expense deduction for 2013?
A. $0.
B. $7,090.
C. $13,000.
D. $20,090.
E. None of the above.

60. Sandra is single and does a lot of business entertaining at home. Because Arthur, Sandra’s 80-year old dependent grandfather who lived with Sandra, needs medical and nursing care, he moved to Twilight Nursing Home. During the year, Sandra made the following payments on behalf of Arthur:

Room at Twilight	$4,500
Meals for Arthur at Twilight	850
Doctor and nurse fees	700
Cable TV service for Arthur’s room	107
Total	$6,157

Twilight has medical staff in residence. Disregarding the AGI floor, how much, if any, of these expenses qualify for a medical deduction by Sandra?
A. $6,157.
B. $6,050.
C. $5,200.
D. $1,550.
E. None of the above.

61. 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 2013 was $100,000. How much of these expenditures can Phillip deduct as a medical expense in 2013?
A. $14,000.
B. $15,000.
C. $21,500.
D. $29,000.
E. None of the above.

62. 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 percentage of AGI limitation, how much of the above expenditures qualify as medical expense deductions?
A. $11,680.
B. $30,680.
C. $30,880.
D. $34,880.
E. None of the above.

63. Brad, who would otherwise qualify as Faye’s dependent, had gross income of $9,000 during the year. Faye, who had AGI of $120,000, paid the following medical expenses in 2013:

Cataract operation for Brad	$ 5,400
Brad’s prescribed contact lenses	1,800
Faye’s doctor and dentist bills	12,600
Prescribed drugs for Faye	2,550
Total	$22,350

Assuming Faye is age 45, she has a medical expense deduction of:
A. $3,150.
B. $4,950.
C. $10,350.
D. $13,350.
E. None of the above.

64. 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 2013:

Round-trip airfare ($350 each)	$ 700
Jean’s hotel in Rochester for four nights ($95 per night)	380
Jean’s meals while in Rochester	105
Tom’s medical treatment	3,500
Tom’s prescription medicine	600

Compute Tom’s medical expenses for the trip (subject to the 10% floor).
A. $4,000.
B. $5,000.
C. $5,180.
D. $5,285.
E. None of the above.

65. Your friend Scotty informs you that he received a “tax-free” reimbursement in 2013 of some medical expenses he paid in 2012. Which of the following statements best explains why Scotty is not required to report the reimbursement in gross income?
A. Scotty itemized deductions in 2012.
B. Scotty did not itemize deductions in 2012.
C. Scotty itemized deductions in 2013.
D. Scotty did not itemize deductions in 2013.
E. Scotty itemized deductions in 2013 but not in 2012.

66. In 2013, 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?
A. If Boris is self-employed, he may deduct $7,200 as a deduction for AGI.
B. If Boris is self-employed, he may deduct $3,400 as a deduction for AGI and may include the $3,800 premium when calculating his itemized medical expense deduction.
C. If Boris is an employee, he may deduct $7,200 as a deduction for AGI.
D. If Boris is an employee, he may include $7,200 when calculating his itemized medical expense deduction.
E. None of the above.

67. During 2013, Hugh, a self-employed individual, paid the following amounts:

Real estate tax on Iowa residence	$3,800
State income tax	1,700
Real estate taxes on land in Puerto Rico (held as an investment)	1,100
Gift tax paid on gift to daughter	1,200
State sales taxes	1,750
State occupational license fee	300
Property tax on value of his automobile (used 100% for business)	475

What is the maximum amount Hugh can claim as taxes in itemizing deductions from AGI?
A. $6,600.
B. $6,650.
C. $7,850.
D. $8,625.
E. None of the above.

68. During 2013, Nancy paid the following taxes:

Tax on residence (for the period from March 1 through August 31, 2013)	$5,250
State motor vehicle tax (based on the value of the personal use automobile)	430
State sales tax	3,500
State income tax	3,050

Nancy sold her personal residence on June 30, 2013, 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 2013 for Nancy?
A. $9,180.
B. $9,130.
C. $7,382.
D. $5,382.
E. None of the above.

69. In Lawrence County, the real property tax year is the calendar year. The real property tax becomes a personal liability of the owner of real property on January 1 in the current real property tax year (assume this year is not a leap year). The tax is payable on June 1. On May 1, Reggie sells his house to Dana for $350,000. On June 1, Dana pays the entire real estate tax of $7,950 for the year ending December 31. How much of the property taxes may Reggie deduct?
A. $0.
B. $2,614.
C. $2,625.
D. $7,950.
E. None of the above.

70. Brad, who uses the cash method of accounting, lives in a state that imposes an income tax (including withholding from wages). On April 14, 2013, he files his state return for 2012, paying an additional $600 in state income taxes. During 2013, his withholdings for state income tax purposes amount to $3,550. On April 13, 2014, he files his state return for 2013 claiming a refund of $800. Brad receives the refund on June 3, 2014. 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 2013 (filed in April 2014)?
A. $3,350.
B. $3,550.
C. $4,150.
D. $5,150.
E. None of the above.

71. Barry and Larry, who are brothers, are equal owners in Chickadee Corporation. On July 1, 2013, 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, 2014, 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 2013?
A. $0.
B. $500.
C. $1,000.
D. $2,000.
E. None of the above.

72. Rick and Carol Ryan, married taxpayers, took out a mortgage of $160,000 when purchasing their home ten years ago. In October of the current year, when the home had a fair market value of $200,000 and they owed $125,000 on the mortgage, the Ryans took out a home equity loan for $110,000. They used the funds to purchase a sailboat to be used for recreational purposes. The sailboat does not qualify as a residence. What is the maximum amount of debt on which the Ryans can deduct home equity interest?
A. $75,000.
B. $90,000.
C. $110,000.
D. $125,000.
E. None of the above.

73. Joseph and Sandra, married taxpayers, took out a mortgage on their home for $350,000 in 1991. 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?
A. $50,000.
B. $100,000.
C. $220,000.
D. $230,000.
E. None of the above.

74. 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?
A. $0.
B. $800.
C. $1,000.
D. $6,800.
E. $7,000.

75. In 2013, Jerry pays $8,000 to become a charter member of Mammoth University’s Athletic Council. The membership ensures that Jerry will receive choice seating at all of Mammoth’s home basketball games. Also in 2013, Jerry pays $2,200 (the regular retail price) for season tickets for himself and his wife. For these items, how much qualifies as a charitable contribution?
A. $6,200.
B. $6,400.
C. $8,000.
D. $10,200.
E. None of the above.

76. Emily, who lives in Indiana, volunteered to travel to Louisiana in March to work on a home-building project for Habitat for Humanity (a qualified charitable organization). She was in Louisiana for three weeks. She normally makes $500 per week as a carpenter’s assistant and plans to deduct $1,500 as a charitable contribution. In addition, she incurred the following costs in connection with the trip: $600 for transportation, $1,200 for lodging, and $400 for meals. What is Emily’s deduction associated with this charitable activity?
A. $600.
B. $1,200.
C. $1,800.
D. $2,200.
E. $3,700.

77. Hannah makes the following charitable donations in the current year:

	Basis	Fair Market Value
Inventory held for resale in Hannah’s business (a sole proprietorship)	$8,000	$ 7,200
Stock in HBM, Inc., held as an investment (acquired four years ago)	16,000	40,000
Baseball card collection held as an investment (acquired six years ago)	4,000	20,000

The HBM stock and the inventory were given to Hannah’s church, and the baseball card collection was given to the United Way. Both donees promptly sold the property for the stated fair market value. Disregarding percentage limitations, Hannah’s current charitable contribution deduction is:
A. $28,000.
B. $51,200.
C. $52,000.
D. $67,200.
E. None of the above.

78. Byron owned stock in Blossom Corporation that he donated to a museum (a qualified charitable organization) on June 8 this year. What is the amount of Byron’s deduction assuming that he had purchased the stock for $10,500 last year on August 7, and the stock had a fair market value of $13,800 when he made the donation?
A. $3,300.
B. $10,500.
C. $12,150.
D. $13,800.
E. None of the above.

79. Zeke made the following donations to qualified charitable organizations during 2013:

	Basis	Fair Market Value
Used clothing (all acquired before 2012) of taxpayer and his family	$ 1,350	$ 375
Stock in ABC, Inc., held as an investment for fifteen months	12,000	10,875
Stock in MNO, Inc., held as an investment for eleven months	15,000	18,000
Real estate held as an investment for two years	15,000	30,000

The used clothing was donated to the Salvation Army; the other items of property were donated to Eastern State University. Both are qualified charitable organizations. Disregarding percentage limitations, Zeke’s charitable contribution deduction for 2013 is:
A. $43,350.
B. $56,250.
C. $59,250.
D. $60,375.
E. None of the above.

80. Karen, a calendar year taxpayer, made the following donations to qualified charitable organizations in 2013:

	Basis	Fair Market Value
Cash donation to State University	$30,000	$ 30,000
Unimproved land to the City of Terre Haute, Indiana	70,000	210,000

The land had been held as an investment and was acquired 4 years ago. Shortly after receipt, the City of Terre Haute sold the land for $210,000. Karen’s AGI is $450,000. The allowable charitable contribution deduction is:
A. $84,000 if the reduced deduction election is not made.
B. $100,000 if the reduced deduction election is not made.
C. $165,000 if the reduced deduction election is not made.
D. $170,000 if the reduced deduction election is made.
E. None of the above.

81. During 2013, Ralph made the following contributions to the University of Oregon (a qualified charitable organization):

Cash	$63,000
Stock in Raptor, Inc. (a publicly traded corporation)	94,500

Ralph acquired the stock in Raptor, Inc., as an investment fourteen months ago at a cost of $42,000. Ralph’s AGI for 2013 is $189,000. What is Ralph’s charitable contribution deduction for 2013?
A. $56,700.
B. $63,000.
C. $94,500.
D. $157,500.
E. None of the above.

82. Pat died this year. Before she died, Pat gave 5,000 shares of stock in Coyote Corporation (a publicly traded corporation) to her church (a qualified charitable organization). The stock was worth $180,000 and she had acquired it as an investment four years ago at a cost of $150,000. In the year of her death, Pat had AGI of $300,000. In completing her final income tax return, how much of the charitable contribution should Pat’s executor deduct?
A. $90,000.
B. $150,000.
C. $180,000.
D. $210,000.
E. None of the above.

83. Which of the following items would be an itemized deduction on Schedule A of Form 1040 not subject to the 2%-of-AGI floor?
A. Professional dues paid by an accountant (employed by Ford Motor Co.) to the National Association of Accountants.
B. Gambling losses to the extent of gambling winnings.
C. Job hunting costs.
D. Appraisal fee paid to a valuation expert to determine the fair market value of art work donated to a qualified museum.
E. None of the above.

84. Paul, a calendar year married taxpayer, files a joint return for 2013. Information for 2013 includes the following:

AGI	$175,000
State income taxes	13,500
State sales tax	3,000
Real estate taxes	18,900
Gambling losses (gambling gains were $12,000)	6,800

Paul’s allowable itemized deductions for 2013 are:
A. $13,500.
B. $32,400.
C. $39,200.
D. $42,200.
E. None of the above.

85. Marilyn, age 38, is employed as an architect. For calendar year 2013, she had AGI of $204,000 and paid the following medical expenses:

Medical insurance premiums	$ 7,800
Doctor bills for Peter and Esther (Marilyn’s parents)	7,300
Doctor and dentist bills for Marilyn	11,100
Prescription medicines for Marilyn	750
Nonprescription insulin for Marilyn	950

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 2013 and received the reimbursement in January 2014. What is Marilyn’s maximum allowable medical expense deduction for 2013?

86. Aaron, age 45, had AGI of $40,000 for 2013. He was injured in a skiing accident and paid $3,600 for hospital expenses and $1,400 for doctor bills. Aaron also incurred medical expenses of $1,200 for his child, who lives with his former wife and is claimed as a dependent by her. In 2014, Aaron was reimbursed $1,300 by his insurance company for the medical expenses attributable to the skiing accident.

a.	Compute Aaron’s deduction for medical expenses in 2013.
b.	Assume that Aaron would have elected to itemize his deductions even if he had no medical expenses in 2013. How much, if any, of the $1,300 reimbursement must be included in gross income in 2014?
c.	Assume that Aaron’s other itemized deductions in 2013 were $7,000 and that he filed as a head of household. How much of the $1,300 reimbursement must he include in gross income in 2014?

87. During 2013, 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?

88. In 2013, Shirley sold her personal residence to Mike for $400,000. Before the sale, Shirley paid the real estate taxes of $7,030 for the calendar year. For income tax purposes, the deduction is apportioned as follows: $4,000 to Shirley and $3,030 to Mike.

a. What is Mike’s basis in the residence?

b. What is Shirley’s amount realized from the sale of the residence?

c. What amount of real estate taxes can Mike deduct?

d. What amount of real estate taxes can Shirley deduct?

89. Brian, a self-employed individual, pays state income tax payments of:

$900 on January 15, 2013 (4th estimated tax payment for 2012)
$1,000 on April 15, 2013 (1st estimated tax payment in 2013)
$1,000 on June 17, 2013 (2nd estimated tax payment in 2013)
$1,000 on September 16, 2013 (3rd estimated tax payment in 2013)
$800 on January 15, 2014 (4th estimated tax payment of 2013)

Brian had a tax overpayment of $500 on his 2012 state income tax return and applied this to his 2013 state income taxes. What is the amount of Brian’s state income tax itemized deduction for his 2013 Federal income tax return?

90. In Piatt County, the real property tax year is the calendar year. The real property tax becomes a personal liability of the owner of real property on January 1 and is payable on July 1 in the real property tax year. On June 30 of this year (assume not a leap year), Harry sells his house to Judy for $110,000 and on July 1, Judy pays the entire real estate tax of $4,380 for the current year ending December 31.

a.	How much of the property taxes may Harry deduct?
b.	How much of the property taxes may Judy deduct?

91. In 2006, Ross, who is single, purchased a personal residence 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?

92. Georgia had AGI of $100,000 in 2013. She donated Heron Corporation stock with a basis of $8,500 to a qualified charitable organization on July 5, 2013.

a.	What is the amount of Georgia’s deduction, assuming that she purchased the stock on December 4, 2012, and the stock had a fair market value of $15,000 when she made the donation?
b.	Assume the same facts as in a., except that Georgia purchased the stock on July 1, 2005.
c.	Assume the same facts as in a., except that the stock had a fair market value of $6,000 (rather than $15,000) when Georgia donated it to the charity.

93. Linda, who has AGI of $120,000 in 2013, contributes stock in Mauve Corporation (a publicly traded corporation) to the Salvation Army, a qualified charitable organization. The stock is worth $65,000, and Linda acquired it as an investment four years ago at a cost of $50,000.

a.	What is the total amount that Linda can deduct as a charitable contribution, assuming she carries over any disallowed contribution from 2013 to future years?
b.	What is the maximum amount that Linda can deduct as a charitable contribution in 2013?
c.	What factors should Linda consider in deciding how to treat the contribution for Federal income tax purposes?
d.	Assume Linda dies in December 2013. What advice would you give the executor of her estate with regard to possible elections that can be made relative to the contribution?

94. George is single and age 56, has AGI of $255,000, and incurs the following expenditures in 2013.

Medical expenses (before 10% floor)	$27,000
Interest on home mortgage	15,500
State income tax	7,500
State sales tax	4,500
Real estate tax	8,600
Charitable contribution	6,500

What is the amount of itemized deductions George may claim?

95. For calendar year 2013, Jon and Betty Hansen (ages 59 and 60) file a joint return reflecting AGI of $280,000. They incur the following expenditures:

Medical expenses before AGI floor	$30,000
Casualty loss (not covered by insurance) before statutory floors	30,000
Interest on home mortgage	10,000
Interest on credit cards	800
Property taxes on home	13,000
Charitable contributions	17,000
State income tax	15,000
Tax return preparation fees	1,200

What is the amount of itemized deductions the Hansens may claim?

96. Charles, who is single and age 61, had AGI of $400,000 during 2013. He incurred the following expenses and losses during the year.

Medical expenses before 10%-of-AGI limitation	$39,500
State and local income taxes	5,200
Real estate taxes	4,400
Home mortgage interest	5,400
Charitable contributions	4,800
Casualty loss before 10% limitation (after $100 floor)	47,000
Unreimbursed employee expenses subject to 2%-of-AGI limitation	8,900
Gambling losses (Charles had $7,400 of gambling income)	9,800

Compute Charles’s total itemized deductions for the year.

97. Helen pays nursing home expenses of $3,000 per month for her mother. The monthly charge covers the following items: $1,400 for medical care, $900 for lodging, and $700 for food. Under what circumstances can Helen include the $3,000 per month payment when computing her medical expense deduction for the year? If Helen is not allowed to include the entire payment, how much can she include?

98. Manny, age 57, developed a severe heart condition, and his physician advised him to install an elevator in his home. The cost of installing the elevator was $15,000, and the increase in the value of the residence was determined to be $5,800. Manny’s AGI for the year was $52,000.

a.	How much of the expenditure can Manny deduct as a medical expense?
b.	Assume the same facts as in part a., except that Manny was paralyzed in an automobile accident and the expenditures were incurred to build entrance and exit ramps and widen the hallways in his home to accommodate his wheelchair. How much of the expenditure can Manny deduct as a medical expense?

99. Samuel, a 36 year old individual who has been physically handicapped for a year, paid $15,000 for the installation of wheelchair ramps, support bars, railings, and widening doorways in his personal residence. These improvements increased the value of his personal residence by $4,000. How much of Samuel’s expenditures qualify as a medical expense deduction (subject to the 10% floor)? Explain.

100. Paul and Patty Black (both are age 66) are married and together have AGI of $140,000 in 2013. They have two dependents and file a joint return. During the year, they paid $8,000 for medical insurance, $15,000 in doctor bills and hospital expenses, and $1,000 for prescribed medicine and drugs.

a.	In December 2013, the Blacks received an insurance reimbursement of $3,500 for hospitalization expenses. Determine the deduction allowable for medical expenses paid during the year.
b.	Assume instead that the Blacks received the $3,500 insurance reimbursement in February 2014. Determine the deduction allowable for medical expenses incurred in 2013.
c.	Assume that the Blacks received the $3,500 insurance reimbursement in February 2014. Discuss whether the reimbursement will be included in their gross income for 2014.

101. Harry and Sally were divorced three years ago. In July of the current year, their son, Joe, broke his arm falling out of a tree. Joe lives with Sally and Sally claims him as a dependent on her tax return. Harry paid for the medical expenses related to Joe’s injury. Can Harry claim the medical expenses he paid for Joe on his tax return?

102. For the past several years, Jeanne and her two sisters have taken turns claiming a dependency exemption deduction for their mother under a multiple support agreement. This year Jeanne will be entitled to the exemption, and her mother needs money for surgery and new eyeglasses. Should Jeanne pay for the medical expenses as her share of her mother’s expenses? How would this benefit Jeanne?

103. Linda is planning to buy Vicki’s home. They want to keep the transaction simple, so the sales agreement will not apportion the property taxes that Vicki has already paid on the home. Comment on the tax implications for Linda and Vicki.

104. Linda borrowed $60,000 from her parents for a down payment on a condominium. She paid interest of $5,500 in 2011, $0 in 2012, and $9,000 in 2013. The IRS disallowed the deduction. Can you offer any explanation for the disallowance?

105. Diane contributed a parcel of land to the United Way. In addition, she contributed bibles and song books from her proprietorship’s book store inventory to First Church, a qualified charitable organization. Should Diane’s charitable contribution deduction for these contributions be determined by the basis or fair market value of the contributed items?

106. Joe, who is in the 33% tax bracket in 2013, expects to retire in 2014 and be in the 25% tax bracket. He plans to donate $50,000 to his church. Because he will not have the cash available until 2014, Joe donates land (long-term capital gain property) with a basis of $10,000 and fair market value of $50,000 to the church in December 2013. He reacquires the land for $50,000 in February 2014. Discuss Joe’s tax objectives and all tax issues related to his actions.