HMWRK Ch 6

Stephanie is 12 years old and often assists neighbors on weekends by babysitting their children. Calculate the 2019 standard deduction Stephanie will claim under the following independent circumstances (assume that Stephanie's parents will claim her as a dependent). Stephanie reported $18,035 of earnings from her babysitting. Question 40

12.2K Stephanie can claim a standard deduction of $12,200, the greater of the minimum standard deduction ($1,100) or $350 plus her earned income but limited to the maximum standard deduction for her filing status, (single is $12,200 for 2019).

This year, Randy paid $30,100 of interest on his residence. (Randy borrowed $478,000 to buy his residence, and it is currently worth $528,000.) Randy also paid $3,200 of interest on his car loan and $5,250 of margin interest to his stockbroker (investment interest expense). How much of this interest expense can Randy deduct as an itemized deduction under the following circumstances? Randy received $2,760 of interest this year and no other investment income or expenses. His AGI is $75,000. Question 31

32860 30.1K (home) 2490 (investment) ---> limited to int. income = 2760 30.1K + 2760 = 32860

Lionel is an unmarried law student at State University Law School, a qualified educational institution. This year Lionel borrowed $34,000 from County Bank and paid interest of $2,040. Lionel used the loan proceeds to pay his law school tuition. Calculate the amounts Lionel can deduct for interest on higher-education loans under the following: Lionel's AGI before deducting interest on higher-education loans is $79,000. Question 14

816 >70K = phase out 79K -70K = 9K 9K/ 15K = 60% 60% X 2040 = 1224 2040 - 1224 = 816

Clem paid self-employment tax of $19,400 (the employer portion is $9,700), and Wanda had $5,600 of Social Security taxes withheld from her pay. Question 3

9.7K The employer portion of the self-employment tax is deductible for AGI but the Social Security tax is not deductible

Don Juan, a single taxpayer, is the sole owner of DJ's Inc., an S Corporation. This year, DJ's Inc. incurred a massive $600,000 business loss, all of which is allocable to Don Juan as the sole shareholder. Assume that the $600,000 loss is not limited by the basis, at-risk, or passive loss rules, and that Don Juan has no other business income or business losses. How much of the $600,000 loss will Don Juan be able to deduct this year? What happens to any loss not deducted this year? Question 5

Deductible Loss = 255K Loss carried forward = 345K (600K - 255K)

Simon lost $5,000 gambling this year on a trip to Las Vegas. In addition, he paid $2,000 to his broker for managing his $200,000 portfolio, and $1,500 to his accountant for preparing his tax return. In addition, Simon incurred $2,500 in transportation costs commuting back and forth from his home to his employer's office, which were not reimbursed. Calculate the amount of these expenses that Simon is able to deduct (assuming he itemizes his deductions). Question 37

Deductible amount = 0 $0. Gambling losses are only deductible to the extent of gambling winnings. Thus, Simon cannot deduct any of the $5,000 gambling losses. Unfortunately, the investment expenses, tax return fees, and commuting expenses are also nondeductible.

Smithers is a self-employed individual who earns $35,000 per year in self-employment income. Smithers pays $2,250 in annual health insurance premiums (not through an exchange) for his own medical care. In each of the following situations, determine the amount of the deductible health insurance premium for Smithers before any AGI limitation. Smithers is single, and the self-employment income is his only source of income. Question 6

Deductible as either a for AGI deduction or itemized $2,250 Smithers can deduct $2,250 either as a deduction for AGI or claim $2,250 as an itemized medical expense.

Fran spent $187 for uniforms for use on her job. Her employer reimbursed her for $147 of this amount under an accountable plan (and did not report the reimbursement as wages). Question 20

Deductible for AGI = 0 Deductible from AGI = 0 Not deductible = 40 (187-147) Not deductible. The unreimbursed employee business expenses of $40 are not deductible. Income and expenses associated with the $147 reimbursement from an accountable plan completely offset each other and are ignored. Note that the accountable plan only reimburses deductible expenses.

Timothy, a plumber employed by ACE Plumbing, spent $99 for small tools to be used on his job, but he was not reimbursed by ACE. Question 21

Deductible for AGI = 0 Deductible from AGI = 0 Not deductible = 99 Not deductible. The unreimbursed employee business expenses of $99 are not deductible.

Wayne lost $735 on the bets he made at the race track, but he won $131 playing slot machines. Question 24

Deductible for AGI = 0 Deductible from AGI = 131 Not deductible = 604 (735 - 131) $131 from AGI as an other itemized deduction. Wayne's gambling loss deduction is limited to his winnings. The remaining $604 is not deductible.

Timmy paid $610 for health insurance premiums this year (not through an exchange and not with pre-tax dollars). Timmy is employed full-time and his employer paid the remaining premiums as a qualified fringe benefit. Question 18

Deductible for AGI = 0 Deductible from AGI = 610 Not deductible = 0 The health insurance is from AGI - medical itemized deduction but subject to an AGI floor limitation