Tax Acct Chp. 10

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.

False

Which of the following would preclude a taxpayer from deducting student loan interest expense?

The taxpayer is taken as a dependent of another taxpayer.

Derek, a cash basis, unmarried taxpayer, had $2,900 of state income tax withheld during 2018. Also in 2018, Derek paid $290 that was due when he filed his 2017 state income tax return and made estimated payments of $5,800 towards his 2018 state income tax liability. When Derek files his 2018 Federal income tax return in April 2019, he elects to take the standard deduction, which reduced his taxable income. As a result of overpaying his 2018 state income tax, Derek receives a refund of $2,030 in 2019. How much of the $2,030 will Derek include in his 2019 gross income?

$0

This year, Nadia donates $17,125 to Eastern University's athletic department. The payment guarantees that Nadia will have preferred seating at football games near the 50-yard line. Assume that Nadia subsequently buys six $120 game tickets. How much can she deduct as a charitable contribution to the university's athletic department? $___

$0 A charitable contribution is defined as a gift made to a qualified organization. The major elements needed to qualify a contribution as a gift are a donative intent, the absence of consideration, and acceptance by the donee. Generally when a donor derives a tangible benefit from a contribution, he or she cannot deduct the value of the benefit. That is the case here. Nadia cannot deduct any portion of the $4,000 donation since it relates to getting preferred seating at an athletic event (here, football games).

In the current year, Wells paid the following expenses: Premiums on an insurance policy against loss of earnings due to sickness or accident $3,000 Physical therapy after spinal surgery $2,000 Premium on an insurance policy that covers reimbursement for the cost of prescription drugs $500 In the current year, Wells recovered $1,500 of the $2,000 that she paid for physical therapy through insurance reimbursement from a group medical policy paid for by her employer. Disregarding the adjusted gross income percentage threshold, what amount could be claimed on Wells's current-year income tax return for medical expenses?

$1,000 [(2,000 - 1,500) + 500]

Jordan Johnson is single and has adjusted gross income of $50,000 in the current year. Additional information is as follows: State income taxes paid $2,000 Mortgage interest on her personal residence 9,000 Points paid on purchase of her personal residence 1,000 Deductible contributions to her IRA 3,000 Uninsured realized casualty loss (in a Federal disaster area) 6,000 Tax preparation fees for her prior year income tax return 400 What amount may Jordan claim as itemized deductions on her current-year income tax return?

$12,900 (????)

Bernadette suffers from multiple sclerosis and has great difficulty climbing stairs. Upon the recommendation of her physician, she has an elevator chair-system installed in her personal residence. In connection with the system, Bernadette incurs and pays the following amounts during the current year: Doctor and hospital bills $6,700 Elevator chair-system 19,500 Installation charge for elevator chair-system 1,500 Cost of certified appraisal 500 In addition, Bernadette pays $1,350 for prescribed medicines. The system has an estimated useful life of 25 years. The appraisal was to determine the value of Bernadette's residence with and without the system. The appraisal states that her residence was worth $224,000 before the system was installed and $240,000 after the installation. Bernadette's AGI for the year was $83,000. What is the total of her qualifying medical expenses for 2018? What is her medical expense deduction for the current year?

$13,050 = [$6,700 + 1,500 + 1,350 + (19,500 - (240,000 - 224,000))] $6,825 (7.5% * $83,000) = 6,225 13,050 - 6,225 = $6,825

Miller owns a personal residence with a fair market value of $200,000 and an outstanding first mortgage of $160,000, which was used entirely to acquire the residence. This year, Miller gets a home equity loan of $10,000 to purchase new jet skis. Interest on the $___ of this mortgage debt is treated as qualified residence indebtedness.

$160,000

Arturo, a calendar year taxpayer, paid $17,000 in medical expenses and sustained a $20,400 casualty loss in 2018 (the loss occurred in a Federally declared disaster area). He expects $11,900 of the medical expenses and $14,280 of the casualty loss to be reimbursed by insurance companies in 2019. How much can Arturo include in determining his itemized deductions for 2018? Disregard %-of-AGI limitations or casualty loss floor in determining your answers. Before considering any limitations (or reductions) on deductions, Arturo can include $___ of the medical expenses and ___ of the casualty loss when determining his itemized deductions in 2018.

$17,000 $6,120 (20,400 - 14,280)

The Wilmoths plan to purchase a house but want to determine the after-tax cost of financing its purchase. Given their projected taxable income, the Wilmoths are in the 24% Federal income tax bracket and the 8% state income tax bracket (i.e., an aggregate marginal tax bracket of 32%). Assume that the Wilmoths will benefit from itemizing their deductions for both Federal and state purposes. The total cash outlay during the first year of ownership will be $26,600 ($2,660 principal payments, $23,940 qualified residence interest payments). If required, round your interim calculation to nearest dollar. As a result, the annual after-tax cost of financing the purchase of the home will be $____.

$18,939 Nondeductible principal payments: $2,660 Deductible qualified residence interest taxes: $23,940 x (1 - .32) = $16,279 Total: $2,660 + $16,279 = $18,939.

Tabitha sells real estate on March 2 of the current year for $299,200. The buyer, Ramona, pays the real estate taxes of $14,960 for the calendar year, which is the real estate property tax year. Round any division to four decimal places and use in subsequent calculations. Round your final answers to the nearest dollar. Assume a 365-day year. $___ of the real estate taxes is apportioned to and is deductible by the seller, Tabitha, and $___ of the taxes is deductible by Ramona. Ramona's basis is in the property is $___ and the amount realized by Tabitha from the sale is $___.

$2,459 (60/365) * 14,960 $12,501 (14,960 - 2,459) $301,659 (2,459 + 299,200) $301,659

Reba, who is single, does a lot of business entertaining at home. Lawrence, Reba's 84-year-old dependent grandfather, lived with Reba until this year, when he moved to Lakeside Nursing Home because he needs medical and nursing care. During the year, Reba made the following payments on behalf of Lawrence: Room at Lakeside $22,275 Meals for Lawrence 4,455 Doctor & nurse fees 3,341 Cable TV service 446 Total $30,517 Lakeside has medical staff in residence. Disregarding the AGI floor, how much, if any, of these expenses qualifies for a medical expense deduction by Reba? The amount that qualifies for the medical expense deduction is $

$30,071

Sydney, a single taxpayer, had $80,000 in adjusted gross income in year 2. During the year, she contributed $15,000 to her church. She also had a $17,000 contribution carryover from her year 1 church contributions. What is the maximum amount of charitable deduction that Sydney may claim on her year 2 income tax return?

$32,000

For calendar year 2018, Stuart and Pamela Gibson file a joint return reflecting AGI of $320,000. Their itemized deductions are as follows. Note: All expenses are before any applicable limitations, unless otherwise noted. Casualty loss in a Federally declared disaster area after $100 floor (not covered by insurance) = $56,800 Home mortgage interest (loan qualifies as acquisition indebtedness) = 22,720 Credit card interest = 1,136 Property taxes on home = 17,040 Charitable contributions = 31,240 State income tax = 19,880 Tax return preparation fees = 1,704 Round your final answers to the nearest whole dollar. The amount of itemized deductions the Gibsons may claim for the year is $___

$88,760 Casualty loss = [$56,800 - (10% × $320,000)] =$24,800 Home mortgage int = 22,720 State taxes ($19,880 income and $17,040 property; limited to $10,000) = 10,000 Charitable contributions = 31,240 = 88,760

For calendar year 2018, Jean was a self-employed consultant with no employees. She had $80,000 of net profit from consulting and paid $7,000 in medical insurance premiums on her policy covering 2018. How much of these premiums may Jean deduct as a deduction for AGI? As an itemized deduction? If an amount is zero, enter "0". Self-employed persons can deduct ___% of their medical insurance premiums as a deduction for AGI in 2018. Thus, Jean may deduct $___ as a deduction ___ AGI and she may deduct $___ as an itemized deduction (subject to the AGI floor).

100%, $7,000, for, $0

David, a sole proprietor of a bookstore, pays a $7,500 premium for medical insurance for himself and his family. Joan, an employee of a small firm that doesn't provide her with medical insurance, pays medical insurance premiums of $8,000 for herself. How does the tax treatment differ for David and Joan? ___deducts 100% of the premium as a deduction for AGI, whereas ___ include(s) the premiums in computing the itemized medical expense deduction.

David, Joan

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).

False

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.

False

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.

False

In January 2019, Pam, a calendar year cash basis taxpayer, made an estimated state income tax payment for 2018. The payment is deductible in 2018.

False

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.

False

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

False

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.

False

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.

False

Mason, a physically handicapped individual, pays $10,000 this year 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 expense for tax purposes.

False

Matt, a calendar year taxpayer, pays $11,000 in medical expenses in 2018. He expects $5,000 of these expenses to be reimbursed by an insurance company in 2019. In determining his medical expense deduction for 2018, Matt must reduce his 2018 medical expenses by the amount of the reimbursement he expects in 2019.

False

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.

False

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.

False

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

False

This year 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) relating to her volunteer work.

False

Dan, a self-employed individual taxpayer, prepared his own income tax return for the past year and has asked you to check it for accuracy. Your review indicates that Dan failed to claim certain business meals expenses. Assume Dan elects to itemize deductions. How are the business meals expenses reported on a tax return? ___ of the business meals expenses in this situation are deductible ___. Will the correction of this omission affect the amount of medical expenses Dan can deduct?

Fifty percent, for AGI, Yes

Kurstie received a $800 state income tax refund this year. Kurstie deducted $3,000 of state income taxes paid in the prior year as part of her itemized deductions. Which of the following statements regarding the taxability of Kurstie's refund is true?

If Kurstie's itemized deductions exceeded the standard deduction by $200, then $200 of the refund is included in gross income.

The City of Lawrence recently was hit by a tornado, 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. Assume both taxpayers itemize their deductions. Are the contributions deductible or not deductible? • Betty's contribution • Jack's contribution

Not deductible Deductible

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

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

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

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

Georgia contributed $2,000 to a qualifying Health Savings Account in the current year. The entire amount qualifies as an expense deductible for AGI.

True

In 2018, Brandon, age 72, paid $5,000 for long-term care insurance premiums. He may include the $5,000 in computing his medical expense deduction for the year.

True

In 2019, Rhonda received an insurance reimbursement for medical expenses incurred in 2018. She is not required to include the reimbursement in gross income in 2019 if she claimed the standard deduction in 2018.

True

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

Joe, a cash basis taxpayer, took out a 12-month business loan on December 1, 2018. He prepaid all $3,600 of the interest on the loan on December 1, 2018. Joe can deduct only $300 of the prepaid interest in 2018.

True

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

On December 31, 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 of the following year. If Lynette itemizes, she can deduct the $500 in the year she used the card.

True

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

Sadie mailed a check for $2,200 to a qualified charitable organization on December 31, 2018. The $2,200 contribution is deductible on Sadie's 2018 tax return if she itemizes her deductions.

True

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.

True

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

True

This year 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.

True

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

In the current year, Roger pays a $4,300 premium for high-deductible medical insurance for him and his family. In addition, he contributed $3,655 to a Health Savings Account. a. How much may Roger deduct if he is self-employed and earned $86,800? Is the deduction for AGI or from AGI? If Roger is self-employed, he may deduct $___ ___AGI. b. How much may Roger deduct if he is an employee (disregarding 7.5% AGI floor implications)? If Roger is an employee, he may deduct $___ for AGI and $___ from AGI if he ___.

a. $7,955 (4,300 + 3,655), for b. $3,655, $4,300, itemizes his deductions

Pierre, a cash basis, unmarried taxpayer, had $4,190 of state income tax withheld during 2018. Also in 2018, Pierre paid $1,048 that was due when he filed his 2017 state income tax return and made estimated payments of $2,933 towards his 2018 state income tax liability. When Pierre files his 2018 Federal income tax return in April 2019, he elects to itemize deductions, which amount to $14,750, including the state income tax payments and withholdings, all of which reduce his taxable income. As a result of overpaying his 2018 state income tax, Pierre receives a refund of $1,676 in 2019. The standard deduction for single taxpayers for 2018 was $12,000. a. What is Pierre's 2018 state income tax deduction? b. How much of the $1,676 will Pierre include in his 2019 gross income?

a. $8,171 (4,190 + 1,048 + 2,933) b. $1,676

William, a high school teacher, annual AGI = $50,000. In December 2018, he won $1,000,000 in the state lottery. William plans to donate $100,000 to his church. He has asked you, his tax adviser, whether he should donate the $100,000 in 2018 or 2019. Indicate whether the following statements are "True" or "False" regarding the tax issues related to William's decision. a. If he donates the $100,000 in any other tax year, his deduction will be limited to $30,000 plus or minus 60% of other income and adjustments. b. William will not be allowed to carry forward the excess contribution not taken as a deduction in the year of contribution. c. William's AGI in the year of receipt of the lottery winnings would be ample enough for him to take the entire contribution as a deduction in that year. d. The deductions for donations to a qualified public charity (his church) are limited to 60% of adjusted gross income (AGI). William should donate the $100,000 in ___

a. True b. False c. True d. True 2018

Indicate whether the following statements are "True" or "False" regarding capital expenditures incurred for medical purposes. a. The capital expenditures must be deemed medically necessary by a physician. b. The item or facility must be used primarily by the patient alone and the expense must be reasonable. c. Appraisal costs related to capital improvements are deductible as medical expenses. d. The full cost of certain home-related capital expenditures incurred to enable a physically handicapped individual to live independently and productively qualifies as a medical expense. e. 'Additional costs to operate and maintain the item are deductible as medical expenses as long as the medical reason for the capital expenditure continues to exist.

a. True b. True c. False d. True e. True

Indicate whether the following are "Deductible" or "Nondeductible" as medical expenses for tax purposes. a. Transportation for medical care b. Medical and hospital insurance premiums c. Nonprescription drugs d. Diaper service, maternity clothes e. Eyeglasses (including contact lenses) f. Hearing aids

a. Deductible b. Deductible c. Nondeductible d. Nondeductible e. Deductible f. Deductible

Indicate whether the following personal expenditures are "Deductible" or "Not deductible" for tax purposes. a. Medical expenses b. Mortgage insurance c. Life insurance premiums d. Child support payments e. Charitable contributions f. Funeral expenses g. Credit card expense

a. Deductible b. Deductible c. Not deductible d. Not deductible e. Deductible f. Not Deductible g. Not Deductible

Indicate whether the following personal expenditures are "Deductible" or "Not deductible" for tax purposes. Ignore any limitations that may affect the deduction. a. Traditional IRA Contributions b. Alimony (pre-2019 divorce agreement) c. Fines and penalties d. Political contributions e. State income taxes f. Hobby losses

a. Deductible b. Deductible c. Not deductible d. Not deductible e. Deductible f. Not deductible

Thomas purchased a personal residence from Rachel. To sell the residence, Rachel agreed to pay $5,500 in points related to Thomas's mortgage. Indicate whether the following are "True" or "False" about points paid in this real estate transaction. a. The seller can deduct the points if certain conditions are met. b. To be deductible, the points paid represent a service charge or payment for specific services. c. Points paid by the seller are treated as an adjustment to the selling price of the residence. d. The buyer may deduct seller-paid points if several conditions are met

a. False b. False c. True d. True

Mike purchased four $100 tickets to a fund-raising dinner and dance sponsored by the public library, a qualified charitable organization. In its advertising for the event, the library indicated that the cost of the tickets would be deductible for Federal income tax purposes. Indicate whether the following statements are "True" or "False" regarding the contribution. a. Because it is a public library, Mike will receive a charitable contribution deduction for the total cost of the ticket. b. Mike will be required to reduce his deduction by the value of the dinner and the dance. c. Mike not be allowed to deduct any portion of the cost of ticket since his intent was to attend the dinner and dance and not make a contribution.

a. False b. True c. False

Jacob, a self-employed taxpayer, is married and has two children. With respect to Health Savings Accounts (HSAs), indicate whether of the following statements are "True" or "False". a. The taxpayer must itemize deductions in order to take the deduction. b. The income earned on the HSA is not included in gross income if it is used to pay medical expenses not covered by the high-deductible plan. c. Contributions to an HSA are deductible for AGI. d. The annual deduction for contributions to an HSA is limited to an amount that depends on whether the taxpayer has self-only coverage or family coverage.

a. False b. True c. True d. True

Indicate whether the following personal expenditures are deductible "For AGI" or "From AGI" (as itemized deductions). a. Interest on student loans b. Contributions to Health Savings Accounts c. Penalty for early withdrawal from savings d. State, local, and foreign taxes on real property e. State income taxes f. Investment interest expense

a. For AGI b. For AGI c. For AGI d. From AGI e. From AGI f. From AGI

Indicate whether the following personal expenditures are deductible "For AGI" or "From AGI" (as itemized deductions). a. Sales/use taxes paid in lieu of state and local income taxes b. Cost of uniforms or other clothing that cannot be used for normal wear c. Job-hunting costs d. Fees incurred for the preparation of one's tax return e. Alimony payments f. Unreimbursed moving expenses

a. From AGI b. From AGI c. From AGI d. From AGI e. For AGI f. For AGI

Barbara incurred the following expenses during the year: $1,770 dues at a health club she joined at the suggestion of her physician to improve her general physical condition, $460 for multiple vitamins and antioxidant vitamins, $750 for a smoking cessation program, $545 for nonprescription nicotine gum, $815 for insulin, and $10,525 for funeral expenses for her mother who passed away in June. Which of these expenses may be included in computing the medical expense deduction? Select "May be included" or "May not be included", whichever is applicable. a. $1,770 dues at a health club she joined at the suggestion of her physician to improve her general physical condition b. $460 for multiple vitamins and antioxidant vitamins c. $750 for a smoking cessation program d. $545 for nonprescription nicotine gum e. $815 for insulin f. $10,525 for funeral expenses

a. May not be included b. May not be included c. May be included d. May not be included e. May be included f. May not be included

Diane owns a principal residence in Georgia, a townhouse in San Francisco, and a yacht in Cape Cod. All of the properties have mortgages on which Diane pays interest. a. For which residences can Diane deduct mortgage interest? b. What are the limitations on Diane's mortgage interest deduction? What strategy should Diane consider to maximize her mortgage interest deduction? Diane's deduction is limited to interest on acquisition indebtedness up to $___ if the debt existed at December 15, 2017 or ___ if incurred after that date. Therefore, she should choose the second residence that will result in the ___ interest deduction.

a. Principal residence plus one of the two other residences b. $1,000,000, $750,000, highest

In computing the medical expense deduction, a taxpayer may include medical expenses for a person who was a dependent at the time the expenses were paid or incurred. Which of the following requirements apply in determining dependency status for the medical deduction? Select "Yes" or "No", whichever is applicable. a. Member of Household or Relationship Test b. Joint Return Test c. CItizen or Residenct Test d. Age Test e. Support Test f. Gross Income Test

a. Yes b. No c. Yes d. Yes e. Yes f. No

Cheryl incurred $8,700 of medical expenses in November 2018. On December 5, the clinic where she was treated mailed her the insurance claim form it had prepared for her with a suggestion that she sign and return the form immediately to receive her reimbursement from the insurance company by December 31. Indicate which of following are tax issues that Cheryl should consider in deciding whether to sign and return the form in December 2018 or January 2019. a. If she receives reimbursement in 2019, she is not required to reduce her 2018 medical expense deduction by the amount of the anticipated reimbursement. b. If she receives reimbursement in 2018, she must increase her medical expense deduction by the amount of the reimbursement. c. She should consider her expected marginal tax rates for 2018 and 2019 and determine whether it is better to receive the reimbursement in 2018 or 2019. d. If she receives the reimbursement in 2019 and deducted the expenses in 2018, she must include the reimbursement in gross income to the extent she received a tax benefit from the medical expense deduction in 2018.

a. Yes, a tax issue b. Not a tax issue c. Yes, a tax issue d. Yes, a tax issue

Joe was in an accident and required cosmetic surgery for injuries to his nose. He also had the doctor do additional surgery to reshape his chin, which had not been injured. a. Will the cosmetic surgery to Joe's nose qualify as a medical expense? b. Will the cosmetic surgery to Joe's chin qualify as a medical expense?

a. Yes, because the surgery was necessary due to injury or abnormality. b. No, because unnecessary cosmetic surgery is nondeductible.

Donna donates stock in Chipper Corporation to the American Red Cross on September 10, 2018. She purchased the stock for $20,125 on December 28, 2017, and it had a fair market value of $28,750 when she made the donation. a. The stock is treated as ___ property and Donna's charitable contribution deduction is $___ for tax purposes. b. Assume instead that the stock had a fair market value of $17,250 (rather than $28,750) when it was donated to the American Red Cross. Donna's charitable contribution deduction would be $___ for tax purposes.

a. ordinary income, $20,125 b. $17,250

Jerry and Ernie are comparing their tax situations. Both are paying all of the nursing home expenses of their parents. Jerry can include the expenses in computing his medical expense deduction, but Ernie cannot. Complete the statements below on why their tax situations may differ. The cost of care in a nursing home, along with ___, ___with the costs for medical or nursing care if the primary reason is ___. If the primary reason for being there is personal, ___ costs for medical or nursing care ___ in the total of deductible medical expenses, ___. Consequently, it appears that Jerry's parents are in the nursing home ___, while Ernie's parents are in the nursing home ___.

both meals and lodging, are included, to get medical care, any, can be included, but meals and lodging must be excluded, to get medical care, for reasons other than medical care

Mason Gregg's car was destroyed by a flood that occurred in a Federally declared disaster area. Unfortunately, his insurance had lapsed two days before he incurred the loss. Mason uses his car for both business and personal use. Mason, who is self-employed, does not have adequate savings to replace the car and must borrow money to purchase a new car. He is considering using his credit card, at a 12% interest rate, to obtain funds for the purchase. Margaret, his wife, would prefer to sell some of their stock in Bluebird, Inc., to raise funds to purchase the new car. Mason does not want to sell the stock because it has declined in value since they purchased it and he is convinced that its price will increase in the next two years. Mason has suggested that they obtain conventional bank financing for the purchase, which charges 7% interest on car loans. Note: Although there are many nontax issues (financial, investment, and personal) involved in the Greggs' decision, this discussion is limited to the tax issues. Complete the statements below regarding the identified tax issues. Interest: Interest on the loans will be ___ Sale of Stock: If the Greggs have capital gains in excess of the loss, ___ loss can be offset against the gains. If they have no capital gains, they will be limited to a capital loss deduction of $___ in the year of sale, with excess capital losses being ___. Other: There will also be tax issues related to ___ on the car, but those issues are independent of the source of funding for the purchase.

deductible to the extent used for business purposes, the entire, $3,000, carried forward, depreciation

As a general rule, a deduction for personal expenditures is ___ by § 262 of the Code.

disallowed

Commercial Bank has initiated an advertising campaign that encourages customers to take out home equity loans to pay for purchases of automobiles. Are there any tax advantages related to this type of borrowing? The TCJA of 2017 ___ the itemized deduction for interest paid on home equity loans from 2018 through 2025. Assuming that the car is used only for personal purposes, the interest on a loan to buy it is ___.

eliminated, not deductible