Tax Chapter 10 True/False
A phaseout of certain itemized deductions applies for all taxpayers who choose to itemize their deductions.
False
A physician recommends a private school for Ellen's dependent child. Because of the physician's recommendation, the cost of the private school will qualify as a medical expense deduction (subject to percentage limitations).
False
A taxpayer pays points to obtain financing to purchase a second residence. At the election of the taxpayer, the points can be deducted as interest expense for the year paid.
False
Adrienne sustained serious facial injuries in a motorcycle accident. To restore her physical appearance, Adrienne had cosmetic surgery. She cannot deduct the cost of this procedure as a medical expense.
False
Contributions to public charities in excess of 50% of AGI may be carried back 3 years or forward for up to 5 years.
False
Dan contributed stock worth $16,000 to his college alma mater, a qualified charity. He acquired the stock eleven months ago for $4,000. He may deduct $16,000 as a charitable contribution deduction (subject to percentage limitations).
False
During the year, Eve (a resident of Billings, Montana) spends three consecutive weeks in Louisville, Kentucky. One week is spent representing the Billings First Christian Church at the national convention, and two weeks are spent vacationing with relatives. One third of Eve's travel expenses will qualify as a charitable deduction.
False
During the year, Victor spent $300 on bingo games sponsored by his church. If all profits went to the church, Victor has a charitable contribution deduction of $300.
False
For all of the current year, Randy (a calendar year taxpayer) allowed the Salvation Army to use a building he owns rent-free. The building normally rents for $24,000 a year. Randy will be allowed a charitable contribution deduction this year of $24,000.
False
For purposes of computing the deduction for qualified residence interest, a qualified residence includes only the taxpayer's principal residence.
False
For purposes of computing the deduction for qualified residence interest, a qualified residence includes the taxpayer's principal residence and two other residences of the taxpayer or spouse.
False
Gambling losses may be deducted to the extent of the taxpayer's gambling winnings. Such losses are subject to the 2% floor for miscellaneous itemized deductions.
False
Grace's sole source of income is from a restaurant that she owns and operates as a proprietorship. Any state income tax Grace pays on the business net income must be deducted as a business expense rather than as an itemized deduction.
False
In 2014, Allison drove 800 miles to volunteer in a project sponsored by a qualified charitable organization in Utah. In addition, she spent $250 for meals while away from home. In total, Allison may take a charitable contribution deduction of $112 (800 miles × $.14).
False
In January 2015, Pam, a calendar year cash basis taxpayer, made an estimated state income tax payment for 2014. The payment is deductible in 2014.
False
In order to dissuade his pastor from resigning and taking a position with a larger church, Michael, an ardent leader of the congregation, gives the pastor a new car. The cost of the car is deductible by Michael as a charitable contribution.
False
Interest paid or accrued during the tax year on aggregate acquisition indebtedness of $2 million or less ($1 million or less for married persons filing separate returns) is deductible as qualified residence interest.
False
Jack sold a personal residence to Steven and paid points of $3,500 on the loan to help Steven finance the purchase. Jack can deduct the points as interest.
False
John gave $1,000 to a family whose house was destroyed by fire. John may claim a charitable deduction of $1,000 on his tax return for the current year.
False
Judy paid $40 for Girl Scout cookies and $40 for Boy Scout popcorn. Judy may claim an $80 charitable contribution deduction.
False
Leona borrows $100,000 from First National Bank and uses the proceeds to purchase City of Houston bonds. The interest Leona pays on this loan is deductible as investment interest subject to the investment interest limits.
False
Maria traveled to Rochester, Minnesota, with her son, who had surgery at the Mayo Clinic. Her son stayed at the clinic for the duration of his treatment. She paid airfare of $300 and $50 per night for lodging. The cost of Maria's airfare and lodging cannot be included in determining her medical expense deduction.
False
Mason, age 70, a physically handicapped individual, pays $10,000 in 2014 for the installation of wheelchair ramps, support bars, and railings in his personal residence. These improvements increase the value of his personal residence by $2,000. Only $8,000 of the expenditure qualifies as a medical deduction (subject to the AGI floor).
False
Matt, a calendar year taxpayer, pays $11,000 in medical expenses in 2014. He expects $5,000 of these expenses to be reimbursed by an insurance company in 2015. In determining his medical expense deduction for 2014, Matt must reduce his 2014 medical expenses by the amount of the reimbursement he expects in 2015.
False
Mindy paid an appraiser to determine how much a capital improvement made for medical reasons increased the value of her personal residence. The appraisal fee qualifies as a deductible medical expense.
False
Personal expenditures that are deductible as itemized deductions include medical expenses, Federal income taxes, state income taxes, property taxes on a personal residence, mortgage interest, and charitable contributions.
False
Ronaldo contributed stock worth $12,000 to the Children's Protective Agency, a qualified charity. He acquired the stock twenty months ago for $6,000. He may deduct $6,000 as a charitable contribution deduction (subject to percentage limitations).
False
The election to itemize is appropriate when total itemized deductions are less than the standard deduction based on the taxpayer's filing status.
False
Tom, whose MAGI is $40,000, paid $3,500 of interest on a qualified student loan in 2014. Tom is single. He may deduct the $3,500 interest as an itemized deduction.
False
A taxpayer may not deduct the cost of new curbing (relative to a personal residence), even if the construction is required by the city and the curbing provides an incidental benefit to the public welfare.
True
Al contributed a painting to the Metropolitan Art Museum of St. Louis, Missouri. The painting, purchased six years ago, was worth $40,000 when donated, and Al's basis was $20,000. If this painting is immediately sold by the museum and the proceeds are placed in the general fund, Al's charitable contribution deduction is $20,000 (subject to percentage limitations).
True
Any capital asset donated to a public charity that would result in long-term capital gain if sold, is subject to the 30%- of-AGI ceiling limitation on charitable contributions for individuals.
True
Bill paid $2,500 of medical expenses for his daughter, Marie. Marie is married to John and they file a joint return. Bill can include the $2,500 of expenses when calculating his medical expense deduction.
True
Chad pays the medical expenses of his son, James. James would qualify as Chad's dependent except that he earns $7,500 during the year. Chad may claim James' medical expenses even if he is not a dependent.
True
Employee business expenses for travel qualify as itemized deductions subject to the 2% floor if they are not reimbursed.
True
Excess charitable contributions that come under the 30%-of-AGI ceiling are always subject to the 30%-ofAGI ceiling in the carryover year.
True
Fees for automobile inspections, automobile titles and registration, bridge and highway tolls, parking meter deposits, and postage are not deductible if incurred for personal reasons, but they are deductible as deductions for AGI if incurred as a business expense by a self-employed taxpayer.
True
Georgia contributed $2,000 to a qualifying Health Savings Account in 2014. The entire amount qualifies as an expense deductible for AGI.
True
Herbert is the sole proprietor of a furniture store. He can deduct real property taxes on his store building as a business deduction but he cannot deduct state income taxes related to his net income from the furniture store as a business deduction.
True
In 2014, Brandon, age 72, paid $3,000 for long-term care insurance premiums. He may include the $3,000 in computing his medical expense deduction for the year.
True
In 2014, Dena traveled 600 miles for specialized medical treatment that was not available in her hometown. She paid $90 for meals during the trip, $145 for a hotel room on Tuesday night, and $15 in parking fees. She did not keep records of other out-of-pocket costs for transportation. Dena can include $206 in computing her medical expenses.
True
In 2015, Rhonda received an insurance reimbursement for medical expenses incurred in 2014. She is not required to include the reimbursement in gross income in 2015 if she claimed the standard deduction in 2014.
True
In April 2014, Bertie, a calendar year cash basis taxpayer, had to pay the state of Michigan additional income tax for 2013. Even though it relates to 2013, for Federal income tax purposes the payment qualifies as a tax deduction for tax year 2014.
True
In the year of her death, Maria made significant charitable contributions of capital gain property. In fact, the amount of the contributions exceeds 30% of her AGI. Maria's executor can elect to deduct charitable contributions of up to 50% of Maria's AGI on Maria's final income tax return.
True
Jim's employer pays half of the premiums on a group medical insurance plan covering all employees, and employees pay the other half. Jim can exclude the half of the premium paid by his employer from his gross income and may include the half he pays in determining his medical expense deduction.
True
Joe, a cash basis taxpayer, took out a 12-month business loan on December 1, 2014. He prepaid all $3,600 of the interest on the loan on December 1, 2014. Joe can deduct only $300 of the prepaid interest in 2014.
True
Letha incurred a $1,600 prepayment penalty to a lending institution because she paid off the mortgage on her home early. The $1,600 is deductible as interest expense.
True
On December 31, 2014, Lynette used her credit card to make a $500 contribution to the United Way, a qualified charitable organization. She will pay her credit card balance in January 2015. If Lynette itemizes, she can deduct the $500 in 2014.
True
Phyllis, a calendar year cash basis taxpayer who itemized deductions, overpaid her 2013 state income tax and is entitled to a refund of $400. Phyllis chooses to apply the $400 overpayment toward her state income taxes for 2014. She is required to recognize that amount as income in 2014.
True
Points paid by the owner of a personal residence to refinance an existing mortgage must be capitalized and amortized over the life of the new mortgage.
True
Sadie mailed a check for $2,200 to a qualified charitable organization on December 31, 2014. The $2,200 contribution is deductible on Sadie's 2014 tax return.
True
Sergio was required by the city to pay $2,000 for the cost of new curbing installed by the city in front of his personal residence. The new curbing was installed throughout Sergio's neighborhood as part of a street upgrade project. Sergio may not deduct $2,000 as a tax, but he may add the $2,000 to the basis of his property.
True
Shirley pays FICA (employer's share) on the wages she pays her maid to clean and maintain Shirley's personal residence. The FICA payment is not deductible as an itemized deduction.
True
The reduced deduction election enables a taxpayer to move from the 30%-of-AGI limitation to the 50%-ofAGI limitation.
True
Trent sells his personal residence to Chester on July 1, 2014. He had paid $7,000 in real property taxes on March 1, 2014, the due date for property taxes for 2014. Trent may not deduct the portion of the taxes he paid for the period the property was owned by Chester.
True
Upon the recommendation of a physician, Ed has a swimming pool installed at his residence because of a heart condition. If he is allowed to deduct all or part of the cost of the pool, Ed's increase in utility bills due to the operation of the pool qualifies as a medical expense.
True