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Exam 6: Individual Deductions

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Question 51

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Scott is a self-employed plumber and his wife, Emily, is a full-time employee for a university. Emily has health insurance from a qualified plan provided by the university, but Scott has chosen to purchase his own health insurance rather than participate in Emily's plan. Besides paying $5,550 for his health insurance premiums, Scott also pays the following expenses associated with his plumbing business: What is the amount of deductions for AGI that Scott can claim this year (2020)?

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Question 52

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This year, Jong paid $3,000 of interest on a qualified education loan. Jong files married filing jointly and reports modified AGI of $152,000. What is Jong's deduction for interest expense on an educational loan?

A) $2,500
B) $3,000
C) $1,500
D) $1,000
E) None of the choices are correct.

F) C) and E)
G) A) and B)

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Question 53

Multiple Choice

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Larry recorded the following donations this year: $520 cash to a family in need $2,420 to a church $520 cash to a political campaign To the Salvation Army household items that originally cost $1,220 but are worth $320. What is Larry's maximum allowable charitable contribution if his AGI is $60,200?

Max, a single taxpayer, has a $270,000 loss from his sole proprietorship. How much of this loss is deductible after considering the excess business loss rules?

Misti purchased a residence this year. Misti, age 32, is a single parent and lives with her 1-year-old daughter. In 2020, Misti received a salary of $160,000 and made the following payments: Misti files as a head of household. Calculate her taxable income this year.

Bruce is employed as an executive and his wife, Marie, is a self-employed realtor. Besides Bruce's salary, Bruce and Marie own a warehouse that they rent to a local business for storage. This year they paid $1,250 for electric service in the warehouse. Marie also paid self-employment tax of $6,200 and Bruce had $7,000 of Social Security taxes withheld from his pay. Marie paid a $45 fee to rent a safe-deposit box to store records associated with her realty operation. Which of the following is a true statement?

The deduction for investment interest in excess of the net investment income carries forward to the subsequent year.

Misti purchased a residence this year. Misti, age 32, is a single parent and lives with her 1-year-old daughter. In 2020, Misti received a salary of $160,000 and made the following payments: Misti files as a head of household. Calculate her taxable income this year.

Unreimbursed employee business expenses and hobby expenses are not deductible.

This year Kelly bought a new auto for $20,000 plus $1,650 in state and local sales taxes. Besides this sales tax, Kelly also paid $8,260 in state income taxes and had mortgage interest of $5,500 ($400,000 acquisition indebtedness on her residence). If Kelly files single with AGI of $56,000, what amount of itemized deductions will she be eligible to claim?

Which of the following costs is NOT deductible as an itemized medical expense?

Tita, a married taxpayer filing jointly, has a $700,000 business loss from her S corporation in 2020. Assume the $700,000 loss satisfies the basis, at-risk amount, and passive loss rules. Assume also that neither she nor her husband has any other business losses or business income. How much of the $700,000 loss may she deduct this year?

Campbell, a single taxpayer, has $95,000 of profits (net of the deduction for self-employment taxes, the self-employed health insurance deduction, and the deduction for contributions to qualified self-employment retirement plans) from her general store, which she operates as a sole proprietorship. She has no employees, $40,000 of qualified property, and $50,000 of taxable income before the deduction for qualified business income. How much is Campbell's deduction for qualified business income?

Karin and Chad (ages 30 and 31, respectively)are married and together have $110,000 of AGI. This year they have recorded the following expenses: Karin and Chad will file married jointly. Calculate their taxable income.

This year, Benjamin Hassell paid $15,900 of interest on a mortgage on his home (Benjamin borrowed $530,000 in 2015 to buy the residence and it is currently worth $848,000), $11,600 on a $145,000 home-equity loan on his home, and $10,050 of interest on a mortgage on his vacation home (loan of $335,000; home purchased for $435,000 in 2016; home is not rented out at any time). How much interest expense can Benjamin deduct as an itemized deduction?

Taxpayers are allowed to deduct mortgage interest on up to $1,000,000 of acquisition debt for their qualified residence if the acquisition debt is incurred after December 15, 2017.

Rachel is an engineer who practices as a sole proprietor. This year, Rachel had net business income of $400,000(net of the deduction for self-employment taxes, the self-employed health insurance deduction, and the deduction for contributions to qualified self-employment retirement plans)from her business. Assume that Rachel pays $150,000 wages to her employees, she has $20,000 of property (unadjusted basis of equipment she purchased last year),she has no capital gains, her taxable income before the deduction for qualified business income is $380,000, and she is unmarried. Calculate Rachel's deduction for qualified business income.

This year Riley files single and reports modified AGI of $76,000. Riley paid $1,200 of interest on a qualified education loan. What amounts can Riley deduct for qualifying education interest?

When taxpayers donate cash and capital gain property to a public charity, the AGI percentage limitation is applied in the following order:

Max, a single taxpayer, has a $270,000 loss from his sole proprietorship in 2020. How much of this loss is not deductible after considering the excess business loss rules?