ACC 3343 CH 5 LEARNSMART

True or false: Health insurance premiums are always 100% deductible as a medical expense.

False

True or false: No drugs obtained from outside the US (with or without a prescription) can be deductible on the US Federal Tax Return.

False

True or false: Self-employment tax is deductible as an itemized deduction along with real estate taxes and state income tax.

False

How many years can excess charitable contributions be carried over before expiring?

Five years

Which of the following types of interest expense is not deductible as an itemized deduction?

Interest on credit cards used to purchase furnishing for a personal residence

Which of the following statements related to investment interest expense is incorrect?

Interest on loans to purchase land held for investment is NOT deductible.

Which of the following donations will qualify as a deductible charitable contribution?

Land donated to a public university

Which of the following medical costs would be deductible as qualified medical expenses?

-Dental work -Eyeglasses -Lasik eye surgery

Andrew volunteered for the American Red Cross after a recent hurricane. He traveled 200 miles and helped the victims of the disaster in the clean up for five days. He also donated $1,500 to the American Red Cross, but charged the amount of the donation on his credit card. He plans to pay $300 plus interest each month on the credit card charge, so he will pay $900 of the $1,500 charge by the end of the year. What amounts will Andrew be able to deduct for his charitable contributions?

-Mileage for the 200 miles he drove to the ravaged area -$1,500 charged to the credit card during the year -The cost of lodging while he is volunteering

Which of the following are deductible?

-Prescription birth control pills -Prescription nicotine patches

Which of the following types of taxes may be deducted from AGI as itemized deductions?

-Real estate taxes on property held for investment -Personal property tax on the value of a boat -State and local income taxes

Medical costs deductible as qualified medical expenses include ______.

-prescription medications -chiropractic services -plastic surgery to reduce scarring after a dog bite -health insurance premiums paid with after tax dollars

How much of the cost of long-term care (nursing home) is deductible if an individual's stay is primarily related to medical reasons?

100% deductible

The total loss from each separate casualty from Federally Declared Disaster Areas during the year is reduced by a $_________ floor and the combined losses from all casualties for the year is reduced by ______% of AGI.

100; 10

Randy had an adjusted gross income of $70,000 in the current year. His car was destroyed in a hurricane that was in a Federally Declared Disaster Area during the year. His basis in the car was $25,000, but its fair market value prior to the accident was only $18,000. The car was a total loss. He did not have collision coverage, so he did not receive any insurance reimbursement for the accident. Randy's deductible tax loss for the casualty after all applicable floor limitations is $______.

10900

When a taxpayer's charitable contributions exceed the AGI ceiling limitation for the year, the excess contributions can be carried forward for ________ years.

5

Cash and property donations to public charities are limited to _____% of a taxpayer's AGI beginning in 2018. Donations of capital gain property to public charities are generally limited to _____% of a taxpayer's AGI. And, donations of capital gain property to private nonoperating foundations are limited to _____% of AGI.

60; 30; 20

Homeowners may deduct interest on up to $______ of acquisition indebtedness on up to two personal residences.

750,000

April had an adjusted gross income of $50,000 last year. During the year, a flood damaged her home in a federally declared disaster area. Since she didn't live in a flood plain, she did not have flood insurance on her home. She sustained damage to her house and furnishings in the amount of $8,500. In a separate event, she discovered that a pair of gold earrings were stolen when she was on a business trip. The earrings were valued at $600. What is the total amount of April's deductible loss after all limitations have been applied?

8,500 casualty -100 reduction - 5,000 AGI Limit = 3,400

Nancy donated an antique desk to her church. Nancy paid $800 for the desk six years ago. An appraisal of the desk reported the fair market value to be $1,000. The church officers decided to donate the desk to a family whose home had been destroyed in a fire. Nancy will be able to deduct $_______ for her contribution.

800

Owen is considering giving a large charitable contribution to an organization in the current year. Owen's adjusted gross income for the year will be $150,000. He wants to contribute $80,000 in either cash or property. If he contributes cash to a public charity, he can deduct $_____ this year. If he contributes capital gain property that is worth $80,000 to a public charity, he can deduct $______. Or, if he contributes the capital gain property to a private nonoperating foundation, he can deduct $______ this year.

90000; 45000; 30000

Beth pays $500 of real estate taxes during the year related to her personal residence. Where will she report this cost, if anywhere, on her tax return?

Schedule A

Beth pays $500 of real estate taxes during the year related to her rental property. Where will she report this cost, if anywhere, on her tax return?

Schedule E

Which method of reporting foreign taxes on a tax return usually leads to a better tax result?

Take a credit on Form 1116

Which of the following statements is incorrect regarding travel for medical reasons?

The cost of meals is deductible if required to be away from home overnight.

Harli is taking her 6-month-old daughter to the doctor to receive vaccinations. Which of the following statements is correct regarding the deductibility of the vaccinations?

The cost of vaccinations is deductible because it is for the prevention of a disease.

Which of the following is true concerning the deduction for qualified medical expenses?

The expenses must be reduced by 7.5% of AGI

Markita donated stock that she has held for less than a year to a qualified charitable organization. Her basis in the stock is $1,000 and the fair market value of the stock is $1,200. Which of the following statements is true regarding Markita's donation?

The stock is ordinary income property. She will deduct $1,000, since her basis is less than fair market value.

Certain contributions of capital gain property do not qualify for a fair market value deduction. Which of the following characteristics of the contribution will cause the asset to not qualify for a fair market value deduction?

The tangible personal property donated is unrelated to the charity's operations

Regarding charitable contributions, which of the following statements is incorrect when referring to donations of capital gain property?

The taxpayer must include the appreciation of the asset in gross income.

Which of the following items is not a qualified medical expense?

Vitamins for promoting good health

Isabella pays $500 each month in after tax dollars for health insurance premiums. She is not self-employed. During the current year, she also incurred $200 in doctor bills and $50 in over-the-counter medications. Her AGI is $45,000. What amount will she be able to deduct as an itemized deduction after the AGI floor is applied?

[($500 x 12) + $200] = $6200; $6200 - ($45,000 x 0.075) = $2,825.

In general, when contributing property to charity, taxpayers are allowed to deduct the fair market value of appreciated __________ ____________ property on the date of the donation.

capital gain

A(n) _________ _________ is defined as a loss from a sudden, unexpected, or unusual event such as a fire, storm, or shipwreck.

casualty loss

After determining the loss on each of the assets affected by the casualty, the taxpayer must further reduce the loss by any __________ ____________ the individual is eligible to receive.

insurance settlement

Taxpayers traveling for the primary purpose of receiving essential and deductible medical care may deduct some or all of the costs of ______________ and ______________.

lodging; transportation

The only types of personal interest still available as a deduction are _________ interest and __________ interest.

mortgage; investment

The deduction of investment interest is limited to a taxpayer's __________ _________ ________.

net investment income

When donating __________ _________ property as a charitable contribution, taxpayers can only deduct the __________ of (1) the property's fair market value or (2) the property's adjusted basis.

ordinary income; lesser

In the current year, a taxpayer may take a medical deduction for doctor bills ______.

paid by the taxpayer for his son who is claimed as a dependent by the taxpayer's ex-wife

Donations to ______ organizations are not deductible for federal income tax purposes.

political

If the state tax payments that were deducted resulted in the taxpayer receiving a refund in the following year, the state tax refund must be included as taxable income according to the __________ __________ rule.

tax benefit

Which of the following terms does not describe a casualty that could be deductible for tax purposes?

weakened

If a taxpayer uses a standard deduction and receives a tax refund, the taxpayer

will not have to include any of the refund in their taxable income for the next year.

Jenny and Jerry have a home with a fair market value of $625,000. They borrowed $400,000 ten years ago to purchase the home. They currently owe $250,000 on the acquisition loan. They recently borrowed $110,000 on a home-equity loan. The proceeds were used to purchase a car, take a vacation, and redecorate their home. What is the maximum amount of their indebtedness that can generate deductible interest in the current year?

$250,000

Gary, age 67, incurred $4,200 in qualified medical expenses in 2019. His AGI was $50,000. Gary will be able to deduct $_______ as an itemized deduction for medical expenses.

$450 $4200-(50,000 x 0.75)Since Gary is 67 (65 or older), his floor limitation is 7.5%

How, if at all, may a taxpayer report foreign taxes on a tax return?

-Deduct on schedule A -Take a credit on Form 1116

Which one of the following types of charitable contributions is not deductible for federal income tax purposes?

Cash paid to attend a fundraising event where only a portion of the funds go to a charitable cause