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Exam 10: Deductions and Losses: Certain Itemized Deductions

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Question 21

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Helen pays nursing home expenses of $3,000 per month for her mother.The monthly charge covers the following items: $1,400 for medical care, $900 for lodging, and $700 for food.Under what circumstances can Helen include the $3,000 per month payment when computing her medical expense deduction for the year? If Helen is not allowed to include the entire payment, how much can she include?

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Helen may include the entire amount paid...

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Question 22

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Edna had an accident while competing in a rodeo.She sustained facial injuries that required cosmetic surgery.While having the surgery done to restore her appearance, she had additional surgery done to reshape her chin, which was not injured in the accident.The surgery to restore her appearance cost $9,000 and the surgery to reshape her chin cost $6,000.How much of Edna's surgical fees will qualify as a deductible medical expense (before application of the 10%-of-AGI floor) ?

A) $0
B) $6,000
C) $9,000
D) $15,000
E) None of these

F) B) and D)
G) C) and E)

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Question 23

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Sandra is single and does considerable business entertaining at home.Because Arthur, Sandra's 80-year-old dependent grandfather who lived with Sandra, needs medical and nursing care, he moved to Twilight Nursing Home.During the year, Sandra made the following payments on behalf of Arthur: $\begin{array} { l r } \text { Room at Twilight } & \$ 4,500 \\\text { Meals for Arthur at Twilight } & 850 \\\text { Doctor and nurse fees } & 700 \\\text { Cable TV service for Arthur's room } & \underline { 107 } \\\text { Total } & \underline { \underline { \$ 6,157 }}\end{array}$ Twilight has medical staff in residence.Disregarding the AGI floor, how much, if any, of these expenses qualify for a medical deduction by Sandra?

Fred and Lucy are married, ages 33 and 32, and together have AGI of $120,000 in 2019.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 2019, they received an insurance reimbursement of $4,400 for the hospitalization.They expect to receive an additional reimbursement of $1,000 in January 2020.Determine the maximum itemized deduction allowable for medical expenses in 2019.

Gambling losses may be deducted to the extent of the taxpayer's gambling winnings.

George is single and age 56, has AGI of $265,000, and incurs the following expenditures in 2019. $\begin{array} { l r } \text { Medical expenses (before 10\%-of-AGI floor) } & \$ 35,000 \\\text { Interest on home mortgage } & 15,500 \\\text { State income tax } & 7,500 \\\text { State sales tax } & 4,500 \\\text { Real estate tax } & 8,600 \\\text { Charitable contribution } & 6,500\end{array}$ What is the amount of itemized deductions George may claim?

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.

Charitable contributions that exceed the percentage limitations for the current year can be carried over for up to three years.

In 2019, Rhonda received an insurance reimbursement for medical expenses incurred in 2018.She is not required to include the reimbursement in gross income in 2019 if she claimed the standard deduction in 2018.

For all of the current year, Randy (a calendar year taxpayer) allowed the Salvation Army to use rent-free a building he owns.The building normally rents for $24,000 a year.Randy will be allowed a charitable contribution deduction this year of $24,000.

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.

For purposes of computing the deduction for qualified residence interest, a qualified residence includes only the taxpayer's principal residence.

Nancy paid the following taxes during the year: $\begin{array}{lr}\text { Tax on residence (for the period from March 1 through August 31) } & \$ 5,250 \\\text { State motor vehicle tax (based on the value of the personal use automobile) } & 430 \\\text { State sales tax } & 3,500 \\\text { State income tax } & 3,050\end{array}$ Nancy sold her personal residence on June 30 of this year under an agreement in which the real estate taxes were not prorated between the buyer and the seller.What amount qualifies as a deduction from AGI for Nancy?

During the year, Eve (a resident of Billings, MT) spends three consecutive weeks in Louisville, KY.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.

This year, Carol, a single taxpayer, purchased a vacation home for $400,000 using a home equity loan of $350,000 on her principal residence.She has no other debt on her principal residence.Carol paid $16,000 of interest on the debt this year.How much of this interest is deductible assuming that Carol itemizes her deductions?

On December 31, 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 of the following year.If Lynette itemizes, she can deduct the $500 in the year she used the card.

Shirley sold her personal residence to Mike for $400,000.Before the sale, she paid the real estate taxes of $7,030 for the calendar year.For income tax purposes, the deduction is apportioned as follows: $4,000 to Shirley and $3,030 to Mike. a.What is Mike's basis in the residence? b.What is Shirley's amount realized from the sale of the residence? c.What amount of real estate taxes can Mike deduct? d.What amount of real estate taxes can Shirley deduct?

Which of the following is not allowed as an itemized deduction?

Quinn, who is single and lives alone, is physically handicapped as a result of a diving accident.To live independently, he modifies his personal residence at a cost of $30,000.The modifications included widening halls and doorways for a wheelchair, installing support bars in the bathroom and kitchen, installing a stairway lift, and rewiring so he could reach electrical outlets and appliances.Quinn pays $200 for an appraisal that places the value of the residence at $129,000 before the improvements and $140,000 after.As a result of the operation of the stairway lift, Quinn experienced an increase of $680 in his utility bills for the current year.Disregarding the AGI floor for medical expenses, how much of these expenditures qualify as medical expense deductions?

Linda is planning to buy Vicki's home.They want to keep the transaction simple, so the sales agreement will not apportion the property taxes that Vicki has already paid on the home.Comment on the tax implications for Linda and Vicki.