Question 1

During the current year, Hom donates a sculpture that cost $1,000 to a museum for exhibition. The sculpture's fair market value was $1,700 on the date of the donation, and Hom's adjusted gross income is $40,000.
a.​
If Hom had held the sculpture for 4 months and the $700 ($1,700 - $1,000) of appreciation would have been a short-term capital gain, calculate the amount of his itemized deduction for the contribution.
b.​
If Hom had held the sculpture for 2 years and the $700 gain would have been a long-term capital gain, calculate the amount of his itemized deduction for the contribution.

Accepted Answer

The answer of During the current year, Hom donates a...

Question 2

​Alice purchases a new personal auto and finances the purchase through the dealer. The interest of $760 she pays on the car loan during the current tax year is deductible.

Accepted Answer

Personal auto loan interest is not deductible on federal income tax returns, as the loan is not considered mortgage interest or investment interest.

Question 3

​For a taxpayer with adjusted gross income of $56,000, private mortgage insurance (PMI) is deductible in 2015.

Accepted Answer

According to the IRS, private mortgage insurance (PMI) is deductible for taxpayers with adjusted gross income of less than $100,000. For taxpayers with adjusted gross income between $54,500 and $109,000, the deduction is phased out. Therefore, a taxpayer with adjusted gross income of $56,000 may potentially qualify for the PMI deduction in 2015.

Question 4

Dongkuk uses his holiday bonus to pay his January 2016 mortgage payment in December 2015. The payment would normally be due January 31st. Dongkuk may deduct the interest paid as part of the early mortgage payment.​

Accepted Answer

The answer of Dongkuk uses his holiday bonus to pay...

Question 5

​Richie Rominey purchases a new $4.3 million qualified principal residence in Palo Alto, CA using a mortgage loan of $3 million. Richie's mortgage interest deduction may be limited.

Accepted Answer

Under the Tax Cuts and Jobs Act, mortgage interest on a qualified principal residence is deductible only up to $750,000 of indebtedness. Since Richie's mortgage loan exceeds $750,000, his mortgage interest deduction may be limited.

Question 6

For 2015, Eugene and Linda had adjusted gross income of $30,000. Additional information for 2015 is as follows: What is the maximum amount that they can use as a deduction for charitable contributions for 2015?

Accepted Answer

The answer of For 2015, Eugene and Linda had adjusted...

Question 7

Gwen has written acknowledgments for each of the following charitable contributions during the current year:
What is Gwen's charitable contribution deduction for the current year?

Accepted Answer

The answer of Gwen has written acknowledgments for each of...

Question 8

Which of the following charitable contributions is not tax deductible?

Accepted Answer

While donations of cash, clothing, and cars to qualified non-profit organizations are typically tax deductible, the donation of time is not. Only actual monetary donations or the donation of physical items can be claimed as tax deductible charitable contributions.

Question 9

Douglas and Dena paid the following amounts of interest during the current year:
​  
a.Calculate the amount of their allowable deduction for investment interest for the current year.
b.Calculate the amount of Douglas and Dena's total allowable deduction for interest for the current year.

Accepted Answer

The answer of Douglas and Dena paid the following amounts...

Question 10

​Perry Mayson, a single taxpayer, graduated law school last year with quite a bit of qualified student loan debt and ends up paying $4,300 in interest on the loan in the current tax year. Fortunately, Perry is well compensated and earns adjusted gross income of $85,000 during the current year. Perry may deduct his student loan interest in the current year.

Accepted Answer

The answer of ​Perry Mayson, a single taxpayer, graduated law...

Question 11

A taxpayer may donate the free use of property to a charitable organization and deduct the value as an itemized deduction.

Accepted Answer

The IRS does not allow a deduction for the value of services or the use of property. A taxpayer can only deduct out-of-pocket expenses related to the donation of their services or the use of their property.

Question 12

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.

Accepted Answer

If the taxpayer reserves any rights or privileges to use a donated item, the donation is considered a partial interest and is not deductible as a charitable contribution.

Question 13

Christine saw a television advertisement asking for donations of used vehicles to a charitable foundation and decided to donate her old car. Which of the following statements is correct?

Accepted Answer

Option A is incorrect because the tax deduction for donating a vehicle is limited to the fair market value of the vehicle at the time of the donation, not equal to the amount she would have received if she sold the car directly.
Option B is incorrect because the tax deduction is limited to the fair market value of the vehicle, not its ultimate sale price.
Option D is incorrect because charitable organizations are required to provide written acknowledgment to donors who contribute $250 or more in goods or property. They are also required to provide a receipt to the donor describing the property being donated, whether the charity provided any goods or services in exchange for the donation, and a good-faith estimate of the value of the goods or services, if any, that were provided.
Therefore, Option C is correct because the donor can claim an estimated value for the auto if the charity uses it rather than selling it. However, the estimate must be based on the fair market value of the vehicle at the time of the donation.

Question 14

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.

Accepted Answer

The answer of Individual taxpayers may carry forward indefinitely charitable...

Question 15

​Which of the following types of interest are not likely to be deductible in 2015?

Accepted Answer

Interest on personal credit cards is not likely to be deductible in 2015.

Question 16

Taxpayers must itemize their deductions to be allowed a charitable contribution deduction.

Accepted Answer

The answer of Taxpayers must itemize their deductions to be...

Question 17

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? If you were Melvin's accountant, what tax planning suggestion might you have made to him?

Accepted Answer

The answer of Melvin owns his home and has a...

Question 18

Sally and Jim purchased their personal residence in Santa Barbara 20 years ago for $150,000. The home has a fair market value today of $1,000,000. For the current year, they have a $10,000 first mortgage on their home, on which they paid $1,000 in interest. They also have a home equity loan secured by their home with a balance throughout the year of $110,000. The proceeds of the home equity loan were used to send their two children to college. They paid interest on the home equity loan of $5,500 for the year.
​
Calculate the amount of their deduction for interest paid on qualified residence acquisition debt and qualified home equity debt for the current year.
​
Qualified residence acquisition debt interest:
​
Qualified home equity debt interest:

Accepted Answer

The answer of Sally and Jim purchased their personal residence...

Question 19

Stewart had adjusted gross income of $22,000 in 2015. During the year, he made the following contributions to qualified charities: ​
$7,000 cash
​
1,000 shares of Able Corporation common stock, acquired in 1980 (cost and fair market value of $5,000)
​
Considering the charitable contribution deduction limitation, what amount can Stewart claim as a deduction for charitable contributions in 2015?

Accepted Answer

Stewart's total charitable contributions for the year were $12,000 ($7,000 cash + $5,000 stock). However, the deduction for charitable contributions is limited to a percentage of the taxpayer's adjusted gross income (AGI). For individuals, the limit is generally 50% of AGI, but it can be lower for certain types of donations or organizations. In this case, since Stewart's AGI is $22,000, the maximum deduction for charitable contributions is $11,000 (50% of $22,000). Therefore, the correct answer is C.

Question 20

Andy borrows $20,000 to invest in bonds. During the current year, his interest on the loan is $2,000. Andy's interest income from the bonds is $400 and his investment expenses are $300.
a.Calculate Andy's itemized deduction for investment interest for this year.
b.Is Andy entitled to a deduction in future years?

Accepted Answer

The answer of Andy borrows $20,000 to invest in bonds....

Quiz 5: Itemized Deductions and Other Incentives

Alice purchases a new personal auto and finances the purchase through the dealer. The interest of $760 she pays on the car loan during the current tax year is deductible.

For a taxpayer with adjusted gross income of $56,000, private mortgage insurance (PMI) is deductible in 2015.

Dongkuk uses his holiday bonus to pay his January 2016 mortgage payment in December 2015. The payment would normally be due January 31st. Dongkuk may deduct the interest paid as part of the early mortgage payment.

Richie Rominey purchases a new $4.3 million qualified principal residence in Palo Alto, CA using a mortgage loan of $3 million. Richie's mortgage interest deduction may be limited.

For 2015, Eugene and Linda had adjusted gross income of $30,000. Additional information for 2015 is as follows: What is the maximum amount that they can use as a deduction for charitable contributions for 2015?

Gwen has written acknowledgments for each of the following charitable contributions during the current year: What is Gwen's charitable contribution deduction for the current year?

Which of the following charitable contributions is not tax deductible?

Douglas and Dena paid the following amounts of interest during the current year: a.Calculate the amount of their allowable deduction for investment interest for the current year. b.Calculate the amount of Douglas and Dena's total allowable deduction for interest for the current year.

A taxpayer may donate the free use of property to a charitable organization and deduct the value 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.

Christine saw a television advertisement asking for donations of used vehicles to a charitable foundation and decided to donate her old car. Which of the following statements is correct?

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.

Which of the following types of interest are not likely to be deductible in 2015?

Taxpayers must itemize their deductions to be allowed a charitable contribution deduction.

Quiz 5: Itemized Deductions and Other Incentives

​Alice purchases a new personal auto and finances the purchase through the dealer. The interest of $760 she pays on the car loan during the current tax year is deductible.

​For a taxpayer with adjusted gross income of $56,000, private mortgage insurance (PMI) is deductible in 2015.

Dongkuk uses his holiday bonus to pay his January 2016 mortgage payment in December 2015. The payment would normally be due January 31st. Dongkuk may deduct the interest paid as part of the early mortgage payment.​

​Richie Rominey purchases a new $4.3 million qualified principal residence in Palo Alto, CA using a mortgage loan of $3 million. Richie's mortgage interest deduction may be limited.

For 2015, Eugene and Linda had adjusted gross income of $30,000. Additional information for 2015 is as follows: What is the maximum amount that they can use as a deduction for charitable contributions for 2015?

Gwen has written acknowledgments for each of the following charitable contributions during the current year: What is Gwen's charitable contribution deduction for the current year?

Which of the following charitable contributions is not tax deductible?

Douglas and Dena paid the following amounts of interest during the current year: ​ a.Calculate the amount of their allowable deduction for investment interest for the current year. b.Calculate the amount of Douglas and Dena's total allowable deduction for interest for the current year.

A taxpayer may donate the free use of property to a charitable organization and deduct the value 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.

Christine saw a television advertisement asking for donations of used vehicles to a charitable foundation and decided to donate her old car. Which of the following statements is correct?

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.

​Which of the following types of interest are not likely to be deductible in 2015?

Taxpayers must itemize their deductions to be allowed a charitable contribution deduction.

Alice purchases a new personal auto and finances the purchase through the dealer. The interest of $760 she pays on the car loan during the current tax year is deductible.

For a taxpayer with adjusted gross income of $56,000, private mortgage insurance (PMI) is deductible in 2015.

Dongkuk uses his holiday bonus to pay his January 2016 mortgage payment in December 2015. The payment would normally be due January 31st. Dongkuk may deduct the interest paid as part of the early mortgage payment.

Richie Rominey purchases a new $4.3 million qualified principal residence in Palo Alto, CA using a mortgage loan of $3 million. Richie's mortgage interest deduction may be limited.

Douglas and Dena paid the following amounts of interest during the current year: a.Calculate the amount of their allowable deduction for investment interest for the current year. b.Calculate the amount of Douglas and Dena's total allowable deduction for interest for the current year.

Which of the following types of interest are not likely to be deductible in 2015?