Taxation Chapter 6: From AGI

Married filing joint taxpayers may deduct no more than $___ in total state and local taxes.

10,000

Gary incurred $5,200 in qualified medical expenses in 2018. His AGI for the year is $50,000. Gary will be able to deduct $_____ as an itemized deduction for medical expenses.

1450

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 (home value at that time was $450,000). 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 and take a vacation. What is the maximum amount of their indebtedness that can generate deductible interest in the current year? $260,000 $360,000 $250,000 $350,000

250,000 acq debt

How many years can excess charitable contributions be carried over before expiring? Three years Five years Indefinitely One year

5

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

5

The overall limitation for cash charitable contribution deductions for individual taxpayers is __% of AGI. The limit is reduced to __% for ordinary gain property other than cash, and __% for long-term capital gain property.

60 50 30

For mortgages obtained in 2019, homeowners may deduct interest on up to $____ of acquisition indebtedness.

750,000

Which of the following types of donations would be deductible as charitable contributions? (Check all that apply) Cash donated to United Way Stocks and bonds donated to the Republican National Committee Land donated to a state university Volunteering 4 hours (personal services) at a local Goodwill store Checks made payable to (and as a donation to) The Boy Scouts of America

Cash donated to United Way Land donated to a state university Checks made payable to (and as a donation to) The Boy Scouts of America

Which one of the following types of charitable contributions is NOT deductible for federal income tax purposes? Travel costs incurred for charitable purposes Contributions made through payroll deduction Contributions made with credit cards where the charge is paid in a subsequent year Cash paid to purchase fundraising products where a portion of the proceeds go to fund a charitable cause

Cash paid to purchase fundraising products where a portion of the proceeds go to fund a charitable cause

Which one of the following types of charitable contributions is NOT deductible for federal income tax purposes? Travel costs incurred for charitable purposes Contributions made with credit cards where the charge is paid in a subsequent year Contributions made through payroll deduction Cash paid to purchase fundraising products where a portion of the proceeds go to fund a charitable cause

Cash paid to purchase fundraising products where a portion of the proceeds go to fund a charitable cause Reason: Cash contributions are deductible in the year paid, including donations of cash or by check, electronic funds transfers, credit card charges, and payroll deductions.

Which of the following medical costs would be deductible as qualified medical expenses? (Check all that apply.) Tummy tuck Eyeglasses Laser eye surgery Dental work Over-the-counter medications

Eyeglasses Laser eye surgery Dental work

qualified medical expenses include

any payments for the care, prevention, diagnosis, or cure or injury, disease or bodily function that are not reimbursed by health insurance or are not paid through a "flexible spending account"

this restriction on medical expenses is called a

floor limitation

Penalties for early-withdrawal of savings are deductible ___ AGI, and interest reported in gross income (includes/excludes) the interest forfeited for the penalty

for; includes

Certain charitable contributions of capital gain property do not qualify for a fair market value deduction. Which of the following characteristics of capital gain property will definitely cause it to qualify for a fair market value deduction? It is tangible property. It has appreciated in value. It is NOT used by the charity for a related purpose. It is intangible property. It is personal property.

intangible

Certain charitable contributions of capital gain property do not qualify for a fair market value deduction. Which of the following characteristics of capital gain property will definitely cause it to qualify for a fair market value deduction? It is NOT used by the charity for a related purpose. It is tangible property. It is personal property. It has appreciated in value. It is intangible property.

intangible property

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

lodging and travel

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

ordinary income

Donations to ______ organizations are NOT deductible for federal income tax purposes. political scientific religious educational

political

taxpayers may also deduct medical expenses incurred to treat their

spouses and their dependents

taxpayers using personal automobiles for medical transportation purposes may deduct a

standard mileage allowance in lieu of actual costs For 2019, the mileage rate is 20 cents per mile

Taxpayers traveling for the primary purpose of receiving essential and deductible medical care may deduct

the cost of lodging while away from home overnight (with certain restrictions) and transportation

True or false: Gambling expenses and losses to the extent of gambling winnings are reported as miscellaneous itemized deductions. True False

true Gambling losses are deductible to the extent of gambling income

the deduction of medical expenses is limited to the amount of

unreimbursed qualified medical expenses paid during the year (no matter when the services were provided) reduced by 10 percent of the taxpayer's AGI

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? (Check all that apply.) $1,500 charged to the credit card during the year The cost of lodging while he is volunteering Mileage for the 200 miles he drove to the ravaged area The value of his time for five days based on his current salary $900 that is actually paid toward the credit card bill during the year

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

the total itemized deduction for state and local taxes is limited to

$10,000 5,000 for a taxpayer filing married separate -foreign income taxes is subject to this limitation

Isabella, age 50, pays $500 each month for health insurance premiums with after-tax dollars. She is not self-employed. During 2018, 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? $3,200 $6,200 $2,825 $0

$2,825 Reason: [($500 x 12) + $200] = $6,200; $6,200 - ($45,000 x 7.5%) = $2,825

Patrick has an adjusted gross income of $160,000 in the current year. He donated $30,000 is cash to a public charity; capital gain property with a basis of $15,000 and a fair market value of $40,000 to a public charity; and publicly traded stock with a basis of $20,000 and a fair market value of $35,000 to a private nonoperating foundation. What is deductible as a charitable contribution for the current year?

$30,000 in cash to the public charity, $40,000 in property to public charity, and $32,000 in stock to the private nonoperating foundation Reason: He can deduct the $30,000 in cash, $40,000 of the capital gain property (up to $160,000 x 30%) to the public charity, and up to $10,000 of the stock to the private foundation ((AGI x 50%) - contributions subject to the 50% and 60% limits).

floor limitation definition

-eliminates any deduction for amounts above the floor -the purpose is to restrict a deduction to taxpayers with substantial qualified expenses

taxpayers may deduct the cost of meals and lodging at

-hospitals -the cost of meals and lodging at nursing home are deductible only when the principle purpose for the stay is medical rather than convenience

qualified domestic charitable donations

-organizations that engage in educational, religious, scientific, governmental and other public activities

common medical expenses includes

-prescription medication, insulin, and medical aids such as eyeglasses, contact lenses and wheelchairs. -over the counter medicines are generally not deductible -payments to medical care providers -transportation for medical purposes -long-term care facilities -health insurance premiums (if not deducted for AGI by self-employed taxpayers) and insurance for long-term care services

individuals may deduct payments made during the year for the following taxes:

-state, local and foreign income taxes -state and local real estate taxes on property held for personal or investment purposes -state and local personal property taxes that are assessed on the value of the specific property

Cash donations to public charities are limited to __% of a taxpayer's AGI. Donations of capital gain property to public charities are generally limited to __% of a taxpayer's AGI. And, donations of certain capital gain property to private nonoperating foundations are limited to __% of AGI.

1 60 2 30 3 20

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 wants to contribute cash or property to a charitable organization this year. Assume his adjusted gross income for the year will be $150,000 and that he only plans to make one of the following donations. If he contributes $100,000 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 publicly traded stock with a FMV of $60,000 and a basis of $40,000 to a private non-operating foundation, he can deduct $____ this year.

90000 45000 30000

Lance paid $21,000 for seven acres of land six years ago. During the current year, Lance donated the land to his church. An appraisal of the land determined that the fair market value of the land is $30,000. Which of the following statements is true concerning the donation of land? Lance will be able to deduct $30,000 as a charitable contribution. Lance will only be able to deduct $21,000 if the church doesn't use the land in its related use. Lance will need to include the appreciation of $9,000 in gross income in order to take the full deduction. Lance can deduct no more than $21,000 for the land contribution.

Lance will be able to deduct $30,000 as a charitable contribution. Reason: In general, taxpayers are allowed to deduct the FMV of capital gain property on the date of donation.

Which of the following types of taxes may be deducted from AGI as itemized deductions? (Check all that apply.) Personal property tax on the value of a car State and local income taxes Excise taxes paid on cigarette and alcohol purchases Real estate taxes on a primary residence Federal income taxes

Personal property tax on the value of a car State and local income taxes Real estate taxes on a primary residence

Patrick has an adjusted gross income of $120,000 in the current year. He donated $50,000 in cash to a public charity; capital gain property with a basis of $15,000 but a fair market value of $35,000 to a public charity; and publicly traded stock with a basis of $12,000 and a fair market value of $25,000 to a private nonoperating foundation. What is deductible as a charitable contribution for the current year? The $50,000 in cash to the public charity and $10,000 of the capital gain donation to the public charity $1,000 in cash to the public charity, $35,000 in property to public charity, and $24,000 in stock to the private nonoperating foundation $50,000 in cash to the public charity, $35,000 in property to public charity, and $24,000 in stock to the private nonoperating foundation $50,000 in cash to the public charity, $15,000 in property to public charity, and $12,000 in stock to the private nonoperating foundation

The $50,000 in cash to the public charity and $10,000 of the capital gain donation to the public charity

Patrick has an adjusted gross income of $120,000 in the current year. He donated $50,000 in cash to a public charity; capital gain property with a basis of $15,000 but a fair market value of $35,000 to a public charity; and publicly traded stock with a basis of $12,000 and a fair market value of $25,000 to a private nonoperating foundation. What is deductible as a charitable contribution for the current year? $50,000 in cash to the public charity, $15,000 in property to public charity, and $12,000 in stock to the private nonoperating foundation $1,000 in cash to the public charity, $35,000 in property to public charity, and $24,000 in stock to the private nonoperating foundation $50,000 in cash to the public charity, $35,000 in property to public charity, and $24,000 in stock to the private nonoperating foundation The $50,000 in cash to the public charity and $10,000 of the capital gain donation to the public charity

The $50,000 in cash to the public charity and $10,000 of the capital gain donation to the public charity

Which of the following statements is NOT a characteristic of the standard deduction? The amount may be increased due to age or eyesight. It may be deducted instead of a taxpayer's itemized deductions. The amount depends on a taxpayer's filing status. The standard deduction is not available for the married filing separately status.

The standard deduction is not available for the married filing separately status.

When seeking medical treatment, which one of the following travel expenses would NOT be deductible? The cost of lodging for a caregiver if away from home overnight (with restrictions). The cost of lodging for the taxpayer if away from home overnight (with restrictions). Transportation costs, such as mileage or airfare. The cost of meals if the taxpayer is required to be away from home overnight.

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

Which of the following statements is NOT accurate regarding the deduction for qualified education loan interest? The interest on educational loans for a taxpayer's dependents is deductible. Loans used to provide room and board during college are considered qualifying educational expenses. The full amount of interest paid on qualified educational loans is deductible. The amount of the deduction is phased out depending on filing status and modified AGI.

The full amount of interest paid on qualified educational loans is deductible.

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 one 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. The stock is capital gain property. She will deduct $1,200, since capital gain property is allowed to be deducted at fair market value. The stock is ordinary income property. She will deduct $1,200, since a stock donation is valued at fair market value. The stock is capital gain property. She will deduct $1,000, since her basis is less than fair market value.

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 asset is intangible, such as stock or bonds. The asset was held for by the donor for a total of 367 days. The asset is real property, such as land or a building. The tangible personal property's use is unrelated to the charity's operations.

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

Which of the following expenses are classified as miscellaneous itemized deductions for 2019? (Check all that apply.) Unreimbursed employee business expenses The unrecovered cost of a life annuity when the taxpayer dies Tax return preparation fees All gambling losses Casualty and theft losses on property held for investment

The unrecovered cost of a life annuity when the taxpayer dies Casualty and theft losses on property held for investment

Which one of the following items is NOT a qualified medical expense? Vitamins for promoting good health Prescription medication for the cure of an illness Vaccinations for the prevention of a disease MRI for the diagnosis of a bodily injury

Vitamins for promoting good health

The system of shifting itemized deductions into one year such that the amount of itemized deductions exceeds the standard deduction for the year, and then deducting the standard deduction the next year is known as ____ itemized deductions.

bunched

In general, when contributing long-term property to charity, taxpayers are allowed to deduct the fair market value of ___ ___ property on the date of the donation.

capital gain

Which of the following expenses is most easily bunched, or accelerated, into one year, so that the itemized deductions can be used in one year and the standard deduction can be used the following year? Mortgage interest expense Gambling losses State income taxes Charitable contributions

charitable donations