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Exam 6: Individual Deductions

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Question 1

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This year Norma, a single taxpayer, paid $11,200 of real estate taxes on her personal residence and 9,500 of state income taxes. Which of the following is a true?

A) Norma can deduct $11,200 of real estate taxes as an itemized deduction.
B) Norma can deduct $9,500 of state income taxes as a for AGI deduction.
C) Norma can deduct $10,000 of taxes as an itemized deduction.
D) Even if Norma has no other itemized deductions, she should claim the standard deduction.
E) None of the choices are correct.

F) A) and B)
G) C) and D)

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Question 2

Multiple Choice

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Which of the following taxes will not qualify as an itemized deduction?

A) Personal property taxes assessed on the value of specific property.
B) State, local, and foreign income taxes.
C) Real estate taxes on a residence.
D) Gasoline taxes on personal travel.
E) None of the choices qualify as an itemized deduction.

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

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Question 3

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Last year Henry borrowed $15,000 to help pay for his dependent daughter's college tuition. This year Henry paid $2,800 of interest on the loan. How much, if any, interest can Henry deduct if he files single with AGI of $72,500?

The phrase "ordinary and necessary" means that an expense must be appropriate and helpful for generating a profit.

Toshiomi works as a sales representative and travels extensively for his employer's business. This year Toshiomi was paid $75,000 in salary and made the following expenditures: Toshiomi also made a number of trips to Las Vegas for gambling. This year Toshiomi won $12,000 in a poker tournament and this amount was almost enough to offset his other gambling losses ($13,420). Calculate Toshiomi's taxable income if he files single.

Taxpayers traveling for the primary purpose of receiving essential and deductible medical care may deduct the cost of travel.

Jenna (age 50) files single and reports AGI of $40,000. This year she has incurred the following medical expenses: Calculate the amount of medical expenses that will be included with Jenna's other itemized deductions.

Cesare is 16 years old and works throughout the year at a local coffee shop. This year, he made $9,200 at the coffee shop and earned $2,000 in interest income from his savings account. Assume that Cesare is claimed as a dependent on his parent's tax return. What is Cesare's standard deduction for the year?

Kaylee is a self-employed investment counselor who also owns a rental property. This year, she collected $85,000 in fees and paid the following expenses: Kaylee files single. Calculate her adjusted gross income.

Taxpayers filing single and taxpayers filing married separate have the same basic standard deduction amount.

This year Riley files single and reports modified AGI of $71,000. Riley paid $1,200 of interest on a qualified education loan. What amounts can Riley deduct for qualifying education interest?

Deductible medical expenses include payments to medical care providers such as doctors, dentists, and nurses and medical care facilities such as hospitals.

Self-employed taxpayers can deduct the cost of health insurance as a "for" AGI deduction as long as they do not actually participate in their spouses' employer-provided health plan.

An individual who is eligible to be claimed as a dependent on another's return and has $1,000 of earned income may claim a standard deduction of $1,350.

Mason paid $4,100 of interest on a loan that paid tuition for him to attend a private university this year. How much of this payment can Mason deduct as interest expense on an educational loan if he files single and reports modified AGI of $90,000?

Taxpayers may elect to deduct state and local sales taxes instead of deducting state and local income taxes.

An individual who forfeits a penalty for prematurely withdrawing a certificate of deposit (CD) is allowed to net the penalty against the interest income from the CD.

The deduction to individual taxpayers for charitable contributions paid in cash made to public charities is limited to ten percent of the taxpayer's AGI.

The itemized deduction for taxes includes all types of state, local, and foreign taxes.

Which of the following is a true statement?