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Exam 5: Deductions for and From AGI

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Question 61

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State sales taxes can be deducted in lieu of state income taxes.

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Question 62

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Gail is a single elementary school teacher. She buys the following items for use in her classroom in 2019: $\begin{array}{llcc} \text {Construction paper and tissues } &\$45\\ \text {Materials for decorating the classroom bulletin boards } &\$200\\ \text { Artist's smock used for in-class finger painting} &\$30\\ \text { 12 Dozen erasers } &\$15\\\end{array}$ What amount can Gail deduct either as a for or from AGI deduction in 2019?

A) $250 as a for AGI deduction and $30 as a from AGI deduction (subject to 2% of AGI)
B) $250 as a for AGI deduction and $0 as a from AGI deduction
C) $290 as a for AGI deduction and $0 as a from AGI deduction
D) $250 as a for AGI deduction and $40 as a from AGI deduction

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Question 63

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Mike and Rose are married and file jointly. Mike earns $45,000 from wages and Rose reports $450 on her Schedule C as an artist. Since Mike's work does not offer health insurance, Rose pays the following health insurance premiums from her business account: $\begin{array} { l r } \text { Family heal th insurance } & \$ 9,500 \\\text { Family dental insurance } & 1,000\end{array}$ How much can Mike and Rose deduct as self-employed health insurance?

Individual taxpayers may carry forward indefinitely charitable contributions that are not allowed as a deduction in the current year due to the adjusted gross income limitation.

Ellen supports her family as a self-employed attorney. She reports $90,000 of income on her Schedule C and pays $8,000 for health insurance for her family, $2,500 for dental insurance, $4,000 for health insurance for her 23-year-old daughter who is no longer a dependent, and $3,000 for disability insurance for herself. What is Ellen's self-employed health insurance deduction?

Amy paid the following interest expense during the current year: $\begin{array}{ll}\text { Qualified home mortgage interest } & \$ 5,000 \\\text { Credit card interest } & \$ 1,000 \\\text { Personal bank loan interest } & \$ 3,000\end{array}$ What is the amount of Amy's interest deduction for the current year?

Miki, who is single and 57 years old, has a qualifying high-deductible insurance plan. She had the following transactions with her HSA during the year: ? $\begin{array} { l r } \text { Contributions to her HSA } & \$ 3,700 \\\text { Interest income earned on her HSA } & 9,739 \\\text { Medical expenses paid from her HSA } & 7,650\end{array}$ a. How much may Miki claim as a deduction for adjusted gross income? b. What is the amount that Miki must report on her federal income tax return as income from her HSA? c. How much is subject to a penalty? What is the penalty percentage? ?

Brittany determined that she paid $450 in gasoline excise taxes during the year when she bought gas for her commute to and from work. Brittany's gas excise taxes are deductible as an itemized deduction.

If a taxpayer contributes a painting to a museum but reserves the right to use the painting for parties, he may not be allowed a deduction for the charitable contribution.

Jody is a physician (not covered by a retirement plan) with a salary of $40,000 from the hospital where she is employed. She supports her husband, Andre, who sells art work and has no earned income. Both are in their twenties. What is the maximum total amount that Jody and Andre may contribute to their IRAs and deduct for the 2019 tax year?

Which of the following is not deductible as interest expense on Schedule A?

A taxpayer who is under 50 years of age and not an active participant in a retirement plan may make a contribution of up to $6,000 to an IRA, subject to the earned income limitation.

Don donates his old car to a qualified charity. The charity then sells the car at an auction. Describe the tax treatment of the donation.

During 2019, Ruth, a nurse at Dr. Pan's office, incurred the following expenses: $\begin{array} { l r } \text { Brokerage account custodial fee } & \$ 40 \\\text { Professional subscriptions to nursing magazines } & \$ 110 \\\text { Tax return preparation fee } & \$ 240 \\\text { Tax advice related to a prior year tax return IRS audit } & \$ 310 \\\text { Nursing uniform expenses } & \$ 200\end{array}$ If Ruth's adjusted gross income is $29,000, calculate her net miscellaneous deductions after the adjusted gross income percentage limitation.

What is the difference between the tax treatment of contributions and distributions from a traditional IRA and a Roth IRA?

If real property is sold during the year, the property taxes must be allocated between the buyer and seller based on the number of days the property was held by each party.

Jeremy, age 38, has $25,000 in a traditional IRA account and is considering taking the money out to buy himself a new car. What will be the tax consequences to Jeremy if he withdraws the $25,000 from his IRA in 2019 for this purpose? Explain.

Which of the following professions is not eligible for a for AGI deduction related to certain unreimbursed business expenses:

Which of the following is not an itemized deduction?

Melvin owns his home and has a $200,000 mortgage related to his purchase of the residence. In the fall of the current year, he borrows $40,000 on credit cards for college costs for his two sons. The interest expense on the mortgage is $15,000 and the interest expense on the credit cards is $6,000. How much of the interest is deductible as an itemized deduction and why?