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Exam 10: Deductions and Losses: Certain Itemized Deductions

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Question 1

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In 2012, 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.

A) True
B) False

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Question 2

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In January 2013, Pam, a calendar year cash basis taxpayer, made an estimated state income tax payment for 2012. The payment is deductible in 2012.

A) True
B) False

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Question 3

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Donald owns a principal residence in Chicago, a vacation lodge in New Mexico, and a yacht (with living quarters) on Lake Michigan.All three properties have mortgages on which Donald pays interest.Discuss any limitations that apply to Donald's mortgage interest deduction, and suggest any strategy Donald should consider to maximize his deduction.

On December 31, 2012, 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 2013. If Lynette itemizes, she can deduct the $500 in 2012.

Pat died this year.Before she died, Pat gave 5,000 shares of stock in Coyote Corporation (a publicly traded corporation) to her church (a qualified charitable organization) .The stock was worth $180,000 and she had acquired it as an investment four years ago at a cost of $150,000.In the year of her death, Pat had AGI of $300,000.In completing her final income tax return, how much of the charitable contribution should Pat's executor deduct?

Georgia contributed $2,000 to a qualifying Health Savings Account in 2012.The entire amount qualifies as a medical expense and is potentially deductible as an itemized deduction.

Judy paid $40 for Girl Scout cookies and $40 for Boy Scout popcorn.Judy may claim an $80 charitable contribution deduction.

Fred and Lucy are married and together have AGI of $120,000 in 2012.They have four dependents and file a joint return.They pay $5,000 for a high deductible health insurance policy and contribute $2,600 to a qualified Health Savings Account.During the year, they paid the following amounts for medical care: $9,200 in doctor and dentist bills and hospital expenses, and $3,000 for prescribed medicine and drugs.In October 2012, they received an insurance reimbursement of $4,400 for the hospitalization.They expect to receive an additional reimbursement of $1,000 in January 2013.Determine the maximum deduction allowable for medical expenses in 2012.

Jerry pays $5,000 tuition to a parochial school run by his church in order to enable his daughter to attend. This is the amount the school charges all students. Part of the tuition payments can be claimed as a charitable contribution.

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.

Matt, a calendar year taxpayer, pays $11,000 in medical expenses in 2012.He expects $5,000 of these expenses to be reimbursed by an insurance company in 2013.In determining his medical expense deduction for 2012, Matt must reduce his 2012 medical expenses by the amount of the reimbursement he expects in 2013.

Your friend Scotty informs you that he received a "tax-free" reimbursement in 2012 of some medical expenses he paid in 2011.Which of the following statements best explains why Scotty is not required to report the reimbursement in gross income?

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.

For calendar year 2012, Jon and Betty Hansen file a joint return reflecting AGI of $280,000.They incur the following expenditures: What is the amount of itemized deductions the Hansens may claim?

The election to itemize is appropriate when total itemized deductions are less than the standard deduction based on the taxpayer's filing status.

Timothy suffers from heart problems and, upon the recommendation of a physician, has an elevator installed in his personal residence. In connection with the elevator, Timothy incurs and pays the following amounts during the current year: The system has an estimated useful life of 20 years. The appraisal was to determine the value of Timothy's residence with and without the system. The appraisal states that the system increased the value of Timothy's residence by $2,000. How much of these expenses qualify for the medical expense deduction (before application of the 7.5% limitation) in the current year?

During the current year, Maria and her three dependent children had annual physical exams, which cost $750, and dental checkups for all four of them, which cost $420. In addition, Maria paid $800 for medically supervised treatments to enable her to stop smoking. After she stopped smoking, she began to gain weight and incurred $1,200 in costs for a medically supervised weight loss program. Which of these expenses qualify for the medical deduction?

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 not claim James' medical expenses because he is not a dependent.

Liz, who is single, travels frequently on business. Art, Liz's 84-year-old dependent grandfather, lived with Liz until this year when he moved to Granite Falls Nursing Home because he needs daily medical and nursing care. During the year, Liz made the following payments to Granite Falls on behalf of Art: Granite Falls has medical staff in residence. Disregarding the 7.5% floor, how much, if any, of these expenses qualifies as a medical expense deduction by Liz?

Zeke made the following donations to qualified charitable organizations during 2012: The used clothing was donated to the Salvation Army; the other items of property were donated to Eastern State University. Both are qualified charitable organizations. Disregarding percentage limitations, Zeke's charitable contribution deduction for 2012 is: