Acc 221 Chapter 5
Marge has a Roth IRA held more than 5 years to which she has contributed $30,000. The IRA has a current value of $62,000. Marge is 65 years old and she takes a distribution of $38,000. How much of the distribution will be taxable to Marge?
$0 Taxpayers that are 59.5 years of age can take distributions with no distribution taxes.
Martha and Rob, a married couple, under 50 years of age, have adjusted gross income on their 2018 joint income tax return of $45,000, before considering any IRA deduction. Martha and Rob have no earned income. What is the amount of Martha's maximum deductible IRA contribution?
$0, Annual contributions to a Roth IRA are not deductible, and retirement distributions are nontaxable. Earnings in both types of IRAs are not taxable in the current year.
Mindy has a Roth IRA held longer than 5 years to which she has contributed $30,000. The IRA has a current value of $62,000. Mindy is 55 years old and she takes a distribution of $38,000 after retiring on disability. How much of the distribution will be taxable to Mindy?
$0, Withdrawals from a Roth IRA are tax free after a 5-year holding period if any of the following requirements are satisfied:
Eliza is a kindergarten teacher for Alexander Hamilton Elementary School. Eliza decorates her classroom with new artwork, posters, bulletin boards, etc. In 2018, she spends $470 on materials and supplies for her classroom. The school reimburses her $100 (the annual reimbursement limit). Eliza can deduct _________ for AGI and _________ from AGI.
$250 for and $0 from AGI There are a number of other deductions for AGI available under the tax law. However, many have limitations regarding the amount and what taxpayer is eligible for the deduction.
The cost of which of the following is deductible as a medical expense?
Birth control pills.
The cost of which of the following expenses is not deductible as a medical expense on Schedule A, before the 7.5 percent of adjusted gross income limitation?
Botox treatment to reduce wrinkles around eyes.
Which of the following type of insurance is not deductible as self-employed health insurance?
Disability Insurance
Which of the following taxes are not deductible as an itemized deduction:
Federal income taxes. Taxpayers are allowed to deduct certain state, local, and foreign taxes paid during the year. The purpose of the deduction for taxes is to relieve the burden of multiple taxation of the same income. However, the tax law distinguishes between a "tax" and a "fee." A tax is imposed by a government to raise revenue for general public purposes, and a fee is a charge with a direct benefit to the person paying the fee. Taxes are generally deductible; fees are not deductible.
Wilma had $3,100 in state income taxes withheld from her paychecks during 2018. In April of 2018, Wilma paid $50 due on her 2017 state tax return. Wilma's total tax liability on her state tax return for 2018 is $2,850. How much should Wilma deduct as an itemized deduction for state income taxes on her 2018 federal income tax return?
For taxpayers electing to deduct state and local income taxes paid during 2018, the amount of the deduction is the total amount of state and local taxes withheld from wages plus any amounts actually paid during the year.
Which of the following items is deductible as a miscellaneous deduction on Schedule A?
Gambling losses to the extent of gambling winnings.
Which of the following is a false statement about health savings accounts (HSAs)?
HSAs are available to any taxpayer using a health plan purchased through the state or federal exchange under the Affordable Care Act.
Which of the following is not deductible as a miscellaneous itemized deduction subject to the 2 percent of AGI floor in 2018?
a.Tax preparation fees. b.Professional dues. c.Unreimbursed employee business expenses. d.Job-hunting expenses. e.None of these choices are deductible as a miscellaneous itemized deduction.
What is the maximum tax-deferred contribution that can be made to a Section 401(k) plan by an employee under age 50 in 2018?
an employee may elect to make an annual contribution up to $18,500 ($24,500 for taxpayers age 50 or older) to a Section 401(k) plan, and (2) the amount of any contributions made to the Section 401(k) plan are also subject to the limitations applicable to all qualified plans (25 percent of compensation subject to a limit of $55,000).
In March of 2018, Thomas makes a $5,000 cash contribution to a public university. In that month, he also donates $20,000 to an organization subject to the 30 percent limitation. Thomas has adjusted gross income for 2018 of $30,000. What is the amount of Thomas's 2018 charitable contribution deduction?
$14,000. 30,000*.6= 18,000 but only 5,000 was donated. 30,000*3= 9000
Carrie finished her undergraduate degree using money from a student loan. She earned $36,000 her first year and paid $2,600 in interest. She can take a deduction for student loan interest in the amount of:
$2,500 Taxpayers are allowed a limited deduction for adjusted gross income for certain interest paid on qualified education loans. However, the amount is subject to a phase out at certain levels of AGI. It phase out after $65,000.
Donna, age 42 and a single taxpayer, has a salary of $104,500 and interest income of $20,000. What is the maximum amount Donna can contribute to a Roth IRA? In your computations, carry out any division to two decimal places.
$3850, (104,500+20,000)/(15,000)($5,500)
Which of the following gifts is a deductible charitable contribution:
A $200 contribution to the federal government to pay down the national debt.
Which of the following donations is not deductible as a charitable deduction?
A donation of taxpayer time picking up trash on the beach. To be deductible, the donation must be made in cash or property; the value of free use of the taxpayer's property by the charitable organization does not qualify. In addition, out-of-pocket expenses related to qualified charitable activities are deductible as charitable contributions.
What is the deadline for making a contribution to a traditional IRA or a Roth IRA for 2018?
April 15, 2018. An IRA contribution may be made at any time before a certain date. April 15, of next year on which the taxes are being prepare for.
Stanley donates a hotel to a university for use as a conference center. The building was purchased 3 months ago for $1,500,000 and has a fair market value of $1,900,000 on the date the contribution is made. If Stanley had sold the building, the $400,000 difference between the sales price and cost would have been a short-term capital gain. What is the amount of Stanley's deduction for this contribution, before considering any limitation based on adjusted gross income?
If cash is donated, the deduction is equal to the amount of the cash. For donated property other than cash, the general rule is that the deduction is equal to the fair market value of the property at the time of the donation. The fair market value is the price at which the property would be sold between a willing buyer and seller.
Which of the following is deductible as interest on Schedule A?
Interest on a loan for a 90-foot yacht (a qualified residence) with a kitchen, 3 baths and 5 bedrooms.
Which of the following interest expense amounts is not deductible in the current year?
Investment interest expense of $10,000, assuming the taxpayer has no investment income. Taxpayers allowed deduction for certain types of interest. Must be legally liable for debt. Nondeductible interest includes
The itemized deduction for state and local in taxes in 2018 is
Limited to no more than $10,000
Which of the following taxes may be deducted as itemized deductions?
Local income taxes.
Lyndon, age 24, has a nonworking spouse and earns wages of $36,000 for 2018. He also received rental income of $5,000 and dividend income of $900 for the year. What is the maximum amount Lyndon can deduct for contributions to his and his wife's individual retirement accounts for the 2018 tax year? You may assume that neither taxpayer is an active participant in another qualified retirement plan.
Married couples may contribute at to $11,000 if a non working spouse or up to $5,500 each.
Charlene has self-only coverage in a qualifying high-deductible health insurance plan. She is 47 years old and wishes to contribute the maximum amount to her HSA. How much is she allowed to contribute and deduct in 2018?
SIngle can only contribute $3,450 in 2018 anadicional $1,000 for the ages 55-65.
Mary has a Roth IRA held more than 5 years to which she has contributed $30,000. The IRA has a current value of $62,000. Mary is 55 years old and she takes a distribution of $38,000. How much of the distribution will be taxable to Mary?
Taxable distribution= Distribution amount receive-Contribute among 38k-30k=8k
Serena is a 40-year-old single taxpayer. She operates a small business on the side as a sole proprietorship. Her 2018 Schedule C reports net profits of $5,624. Her employer does not offer health insurance. Serena pays health insurance premiums of $7,545 in 2018. Serena also pays long-term care insurance premiums of $600 in 2018.
The deduction is limited to the amount of net profit of the business. Therefore, Serena will be eligible for a total health care deduction of $5,624 (up to the amount of Net Profit of the business) as this deduction is only available against a profit.
Which of the following is false about the self-employed health insurance deduction?
The self-employed health insurance deduction is an itemized deduction.
Which of the following statements with respect to a qualified retirement plan is not accurate?
This is False, Contributions to SIMPLE IRAs are limited to 15 percent of the taxpayer's net earned income or $50,000, whichever is greater. Under the tax law, favorable tax treatment is granted to contributions, by or for employees, to qualified retirement plans. Employers may claim a deduction in the current year for contributions to qualified retirement plans on the employees' behalf, while the employees do not include the employer contributions in income until the contributed amounts are distributed. Most retirement plans have a number of requirements in order to be classified as "qualified".
Which of the following is not considered a deductible medical expense?
Toothbrush.
