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Exam 6: Individual Deductions

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Question 21

Multiple Choice

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Which of the following is a true statement?

A) Taxpayers may only deduct interest on up to $1,500,000 of acquisition indebtedness
B) Taxpayers may deduct interest on up to $1,000,000 of home-equity debt
C) The deduction for investment interest expense is not subject to limitation
D) A taxpayer who incurs acquisition indebtedness in 2018 may only deduct interest on up to $750,000 of acquisition indebtedness
E) None of the choices are correct.

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

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Question 22

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

A) True
B) False

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Question 23

Multiple Choice

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Opal fell on the ice and injured her hip this winter. As a result she paid $3,100 for a visit to the hospital emergency room and $850 for follow-up visits with her doctor. While she recuperated, Opal paid $600 for prescription medicine and $700 to a therapist for rehabilitation. Insurance reimbursed Opal $1,280 for these expenses. What is the amount of Opal's qualifying medical expense?

Which of the following is a true statement?

All reasonable moving expenses are deductible by employees.

Taxpayers generally deduct the lesser of their standard deduction or their itemized deductions.

Which of the following is a true statement?

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.

Margaret Lindley paid $15,000 of interest on her $300,000 acquisition debt for her home (fair market value of $500,000) , $4,000 of interest on her $30,000 home-equity loan, $1,000 of credit card interest, and $3,000 of margin interest for the purchase of stock. Assume that Margaret Lindley has $10,000 of interest income this year and no investment expenses. How much of the interest expense may she deduct this year?

All investment expenses are itemized deductions.

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

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

Han is a self-employed carpenter and his wife, Christine, works full time as a grade school teacher. Han paid $525 for carpentry tools and supplies, and Christine paid $3,600 as her share of health insurance premiums (not with pretax dollars) for Han and herself in a qualified plan provided by the school district (not through an exchange) . Which of the following is a true statement?

Detmer is a successful doctor who earned $204,800 in fees this year, but he also competes in weekend golf tournaments. Detmer reported the following expenses associated with competing in almost a dozen tournaments: This year Detmer won $5,200 from competing in various golf tournaments. Assuming that Detmer itemizes his deductions, what amount of the golfing expenses are deductible after considering all limitations if the tournament golfing is treated as a hobby activity?

This year, Benjamin Hassell paid $20,000 of interest on a mortgage on his home (Benjamin borrowed $600,000 in 2015 to buy the residence and it is currently worth $1,000,000), $12,000 on a $150,000 home-equity loan on his home, and $10,000 of interest on a mortgage on his vacation home (loan of $300,000; home purchased for $400,000 in 2016; home is not rented out at any time). How much interest expense can Benjamin deduct as an itemized deduction?

Glenn is an accountant who races stock cars as a hobby. This year Glenn was paid a salary of $80,000 from his employer and won $2,000 in various races. What is the effect of the racing activities on Glenn's taxable income if Glenn has also incurred $4,200 of hobby expenses this year? Assume that Glenn itemizes his deductions.

Rental or royalty expenses are deductible "for" AGI.

Erika (age 62)was hospitalized with injuries from an auto accident this year. She incurred the following expenses from the accident: In addition, Erika's auto was completely destroyed in the accident. She bought the car several years ago for $18,000 and it was worth $4,700 at the time of the accident. What are Erika's itemized deductions this year if she was uninsured and her AGI is $40,000?

This year Tiffanie files as a single taxpayer. Tiffanie received $67,700 of salary and paid $3,200 of qualified educational interest. This year Tiffanie paid moving expenses of $5,000 and received $9,800 of alimony (from her ex-husband,whom she divorced in 2012). What is Tiffanie's AGI?

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 $77,500?