ACCT 120 Chapter 4, 5, and 6

Isabella, age 50, 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?

$2,825

How much net income must Atlas report from this business?

$202,300

Under current tax law, the deductible amount for expenses under the educator expense deduction is limited per taxpayer to

$250

Roy purchased an office building on March 30, 2015, for $250,000, $25,000 of which was for the land. On July 30, 2018, he sold the office building. What is the cost recovery deduction for 2018?

$3,125.

On May 5, 2013, Jill purchased equipment for $40,000 to be used in her business. She did not elect to expense the equipment under Section 179 or bonus depreciation. On January 1, 2018, she sells the equipment to a scrap metal dealer. What is the cost recovery deduction for 2018?

$1,784.

Shana is a self-employed carpenter who had net earnings from self-employment of $3,500. She paid $325 per month for health insurance over the last year. Shana is entitled to a for AGI deduction for health insurance of:

$3,500

How much is Jimmy (in Brazil trip) allowed to deduct?

$4,598.

Gary, age 67, incurred $4,200 in qualified medical expenses in 2018. His AGI was $50,000. Gary will be able to deduct $___ as an itemized deduction for medical expenses.

$450

During the year, Cory purchased a log skidder (7-year property) for $55,000 for his business. Assume that he has income from his business of $30,000, and he and his wife have combined salaries and wages income of $40,000. What is the maximum deduction he can take for his business in relation to the log skidder purchase?

$55,000.

For 2018 the maximum aggregate annual contribution that a taxpayer, under age 55, can make to an HSA for family coverage is

$6,900

Mia is required under a 2017 divorce decree to pay $600 of alimony and $300 of child support per month for 12 years. In addition, Mia makes a voluntary payment of $100 per month. How much of each total monthly payment can Mia deduct in 2018?

$600

For 2018, Thomas, a single parent, reported the following amounts relating to his investments: What is the maximum amount that Thomas could deduct in 2018 as investment interest expense?

$7,000.

Frank purchased a vehicle for business and personal use. In 2018, he used the vehicle 70% for business (11,000 business miles incurred equally throughout the year) and calculated his vehicle expenses using the standard mileage rate. Frank also paid $1,800 in interest and $480 in county property tax on the car. What is the total business deduction related to business use of the car?

$7,591.

What is the maximum amount of personal residence acquisition debt on which interest is fully deductible on Schedule A?

$750,000.

Annie is self-employed and has $58,000 in income from her business. She also has investments that generated dividends of $3,000 and interest of $2,500. What is Annie's self-employment tax for the year?

$8,195.

The Renfros were granted a decree of divorce in 2017. In accordance with the decree, Josh Renfro is to pay his ex-wife $24,000 a year until their only child, Evelyn, now 10, turns 18, and then the payments will decrease to $14,000 per year. For 2018, how much can Josh deduct as alimony in total?

$14,000

On April 15, 2016, Andy purchased some furniture and fixtures (7-year property) for $10,000 to be used in his business. He did not elect to expense the equipment under § 179 or bonus depreciation. On June 30, 2018, he sells the equipment. What is the cost recovery deduction for 2018?

$875.

Lawrence purchased an apartment building on February 10, 2018, for $330,000, $30,000 of which was for the land. What is the cost recovery deduction for 2018?

$9,546.

On June 30, 2018, Ken purchased an apartment building for $500,000. Determine the cost recovery deduction for 2018

$9,850.

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

-lodging -transportation

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CHAPTER 5

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CHAPTER 6

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Which of the following statements is not correct regarding alimony?

Alimony is another term for child support.

Which of the following statements are characteristics of alimony for divorce decrees before 1/1/19?

Alimony payments can NOT continue after the death of the recipient. Alimony is included in the gross income of the person receiving it. Alimony must be paid in cash. Alimony is deductible for AGI for the person paying it.

If a service member moves because of a permanent change of station, they can deduct the reasonable unreimbursed expenses of moving themselves and members of their household, including:

All of the choices are correct.

To be eligible to fund a Health Savings Account (HSA), a taxpayer must meet which of the following criteria

All of these choices are correct.

Which of the following medical payments would be deductible for the taxpayer in the current year?

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

Generally, a taxpayer may deduct the cost of medical expenses for which of the following?

Doctor-prescribed birth control pills

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

False

Daryl, who had significant itemized deductions for 2018 and therefore was eligible to use Schedule A, purchased a new vehicle in 2018 for $40,000 with a state sales tax of 10%. The allocated deduction amount for other purchases made by Daryl throughout the year, using the IRS state and local sales tax tables, would be $750. He also paid state income taxes of $4,500 for 2018. Daryl's best option to legally maximize his tax savings in 2018, assuming he was under the $10,000 limit for state and local taxes would be to:

deduct his total amount of allowable state sales tax deduction on Schedule A.

Prescription drugs obtained from sources outside the United States, such as Canada, are:

deductible if prescribed by a physician and approved by the FDA for legal importation.

A taxpayer may deduct interest expense paid on qualified ___ loans where the proceeds were used for tuition, fees, books, and other necessary expenses. The interest is deductible ___ AGI.

education, for

True or false: A taxpayer that has a Health Savings Account can also be enrolled in Medicare.

false

Contributions to an HSA made by a qualified individual are a ___ AGI deduction, assuming that the

for

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

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

During 2018, Raul incurred and paid the following expenses: What is the total amount of medical expenses (before considering the limitation based on AGI) that would enter into the calculation of itemized deductions for Raul's 2018 income tax return?

$1,170

Mandy, a CPA, flew from Raleigh to Seattle to attend an accounting conference that lasted four days. Then she took three days of vacation to go sightseeing. Mandy's expenses for the trip are as follows:

$1,425.

Gary, age 47, incurred $5,200 in qualified medical expenses in 2018. His AGI was $50,000. Gary will be able to deduct $___ as an itemized deduction for medical expenses.

$1,450 ... $450?

At the beginning of June 2018, Julia left her husband and is currently living in an apartment. The couple has no children. At the end of the current year, no formal proceedings have occurred in relation to the separation or potential divorce. Julia has been making a $2,000 a month maintenance payment since moving out. How much can Julia deduct in total as alimony for 2018?

$0

In 2014 through 2017, Korey, who is single, borrowed a total of $25,000 for higher education expenses on qualified education loans. In 2018, while still living at home and being claimed by his parents as a dependent, he began making payments on the loan. The first year's interest on the loan was reported as $550, and his AGI for the year was less than $65,000. The amount that Korey can claim on his 2018 tax return is:

$0

Raquel, who works in medical sales, drives her own vehicle to various locations for client sales meetings. Her employer reimburses her $400 each month for various business expenses and does not expect Raquel to provide proof of her expenses. Her employer included this $4,800 reimbursement in Raquel's 2018 W-2 as part of her wages. In 2018, Raquel incurred $3,000 in transportation expense, $1,000 in parking and tolls expense, $1,800 in car repair expense, and $600 for expenses while attending a professional association convention. Assume that Raquel uses the vehicle for business purposes only and that she maintains adequate documentation to support all of these expenditures. What amount is Raquel entitled to deduct on her Schedule A for other itemized deductions?

$0 because employee expenses are no longer deductible as an itemized deduction.

As a for AGI deduction, self-employed health insurance premiums are deductible at

100%

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

Student loan interest is reported on Form

1098-E

Individuals can contribute ___ to an HSA and family coverage is limited to contributions of $___ (for taxpayers under 55).

3450, 6900

If a taxpayer is ___ or older, the amount he or she may contribute is increased by $___

55, $1000

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%

Jordan. How many miles would qualify as transportation expenses for tax purposes?

7.

The threshold amount for the deductibility of allowable medical expenses ordinarily is:

7.5% of AGI.

Which of the following statements is not true regarding documentation requirements for charitable contributions?

A contribution charged to a credit card is a noncash contribution for purposes of documentation requirements

Taxpayers eligible to take the student loan interest deduction do not include

A student who is claimed as a dependent on another's return.

Which of the following penalties is deductible for AGI?

The penalty for early withdrawal of a timed savings account

Penalties for the early withdrawal of savings are reported by the financial institution on

Box 2 of Form 1099-INT

For AGI, or above-the-line, deductions

Can reduce overall tax liability.

Which expense, incurred and paid in 2018, can be claimed as an other itemized deduction?

Gambling losses

Which of the following items does not qualify as an educator expense item deduction?

Home schooling expenses.

Of the following items, which one does not qualify as an itemized deduction for state and local taxes?

Hotel taxes incurred on personal travel.

Which of the following is NOT a "trade or business" expense?

Interest on investment indebtedness.

Which of the following is false with respect to the standard mileage rate?

It includes parking fees, tolls, and property taxes on the vehicle.

In 2018, the president of the United States declared a federal disaster due to brush fires in the Southwest. Lisa lives in that area and lost her home in the fires. What choice does she have regarding when she can claim the loss on her tax return?

It may be claimed in 2017 or 2018.

Izzy ran into a cash shortfall and had to cash in a certificate of deposit early. She incurred a $50 penalty for early withdrawal. How should Izzy treat the penalty for tax purposes?

Izzy can deduct the $50 as a "for" AGI deduction.

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

Lasik eye surgery Dental work Eyeglasses

For 2018, the deduction by a taxpayer for investment interest expense is

Limited to the taxpayer's net investment income for 2018

Horatio and Maria are married and have three children. Horatio is self-employed and pays health insurance premiums for himself and his family. Which of the following situations would disqualify part or all of the premium costs from being deductible for AGI?

Maria has an employer-sponsored health insurance plan available at work, but they do not participate.

Deductible expenses for a service member's moving do not include

Meals incurred during the move

To be eligible to deduct moving expenses, a taxpayer:

Must meet all of the provided criteria.

The majority of itemized deductions are

Personal living expenses

Which of the following are deductible?

Prescription birth control pills Prescription nicotine patches

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

Prescription medications Plastic surgery to reduce scarring after a dog bite Chiropractic services Health insurance premiums paid with after tax dollars

Which of the following types of taxes may be deducted from AGI as itemized deductions? (Check all that apply.)

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

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

Which of the following statements is correct regarding the deductibility of self-employment tax for self-employed taxpayers?

Self-employed taxpayers can deduct the employer portion of the self-employment tax they pay for AGI.

The maximum tax bases and percentages for 2018 for the two portions of the self-employment tax are which of the following?

Social Security 128,400; 12.4% Medicare Unlimited; 2.9%

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.

How much of a self-employed taxpayer's self-employment tax may be deducted for AGI?

The employer portion of self-employment tax is deductible.

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

The expenses must be reduced by 7.5% of AGI

Which of the following statements is not accurate regarding the deduction for qualified education loan interest?

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

Which of the following are true regarding an HSA, if the taxpayer is an employee?

The taxpayer must have a high-deductible health plan. No permission is required from the IRS to establish the HSA. The taxpayer may have a separate disability insurance plan.

Itemized deductions are taken when

They are higher than the standard deduction.

True or false: A qualified education loan may be incurred by the parent of a child attending a qualified institution as long as that child is a dependent.

True

Trade or business expenses are treated as

a deduction FOR AGI

Court-ordered cash payments pursuant to a divorce or legal separation which provide financial support to an ex-spouse and do not continue after the death of the ex-spouse are referred to as

alimony.

Which of the following organizations qualifies for deductible charitable contributions?

all of the above

For 2018, the amount of the sales tax deduction is calculated by:

all of the choices are correct.

A qualified education loan may be used for expenses related to

at least half-time work load.

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 gains