Question 1

In order to deduct a charitable contribution, taxpayers must itemize on their return.

Accepted Answer

This is true. Charitable contributions can only be deducted if the taxpayer itemizes their deductions on their tax return.

Question 2

For 2015, the investment interest expense deduction is limited to the taxpayer's gross investment income.

Accepted Answer

False

Question 3

Loan fees that are not "points", or prepaid interest, are deductible as interest on Schedule A.

Accepted Answer

Loan fees that are not "points" or prepaid interest are generally not deductible as interest on Schedule A. Instead, they may need to be capitalized and deducted over the life of the loan or under specific circumstances. Points or prepaid interest can be deductible, but other loan fees typically do not qualify as mortgage interest deductions.

Question 4

In 2014, Roxanne's nephew was her dependent. For 2015, he no longer qualifies as her dependent. However, she paid $650 in 2015 for medical expenses she incurred in 2014 when he was her dependent. Roxanne can include the $650 in figuring her medical expense deduction in 2015.

Accepted Answer

Roxanne can include the $650 in her medical expense deduction for 2015, even though her nephew is no longer her dependent, because the medical expenses were incurred in 2014 when he was her dependent.

Question 5

Rick and Claudia live in an apartment and have purchased land where they plan to build their home. They have a mortgage on the lot and have received a Form 1098 from the lender showing the interest paid on the note. Interest paid on this loan is deductible as home mortgage interest on their Schedule A.

Accepted Answer

The answer of Rick and Claudia live in an apartment...

Question 6

Personal casualty losses resulting from termite damage are deductible.

Accepted Answer

Personal casualty losses are deductible only if the loss is the result of a sudden, unexpected, or unusual event. Termite damage is considered gradual and thus not deductible.

Question 7

A taxpayer generally has the option of deducting foreign taxes paid on Schedule A or taking a foreign tax credit.

Accepted Answer

A taxpayer can choose to deduct foreign taxes paid on Schedule A or take a foreign tax credit, but they cannot do both. The choice will depend on which option yields the greater tax benefit for the taxpayer.

Question 8

Cynthia makes weekly cash contributions of $30 to her church. She pays by check. Since her annual contributions to the church are more than $250, she must obtain a written acknowledgment from the church to support her contribution deduction.

Accepted Answer

The requirement for a written acknowledgment from the church only applies to contributions of $250 or more made in a single donation, not cumulative donations throughout the year. Therefore, Cynthia does not need to obtain a written acknowledgment for her weekly contributions of $30.

Question 9

Personal property taxes paid on personal-use assets, such as the family car, are deductible on Schedule A.

Accepted Answer

Personal property taxes on personal-use assets, such as the family car, are deductible on Schedule A as long as the taxpayer itemizes deductions instead of taking the standard deduction. However, under the Tax Cuts and Jobs Act of 2017 (TCJA), there is a limit of $10,000 ($5,000 if married filing separately) on the total amount of state and local taxes, including property taxes, that can be deducted on Schedule A.

Question 10

The cost of aspirin and over-the-counter cough medicine is a deductible medical expense even though they are nonprescription drugs.

Accepted Answer

According to IRS guidelines, nonprescription drugs (except for insulin) are not considered deductible medical expenses. Only prescribed drugs and medicines are deductible.

Question 11

For 2015, sales taxes are deductible as an itemized deduction based only on the actual amount of sales taxes paid.

Accepted Answer

The answer of For 2015, sales taxes are deductible as...

Question 12

Taxpayers can deduct qualified residence interest on their principal residence and on a second residence selected by the taxpayer.

Accepted Answer

Taxpayers can indeed deduct qualified residence interest on their principal residence and on a second residence selected by them. However, there are certain limitations and criteria that the second residence must meet in order to qualify for the deduction.

Question 13

If donated appreciated capital gain property is put to a use that is unrelated to the purpose or function of a charity's tax-exempt status, the contribution must be reduced by the amount of any long-term capital gain that would have been realized if the property had been sold at its fair market value at the time of the contribution.

Accepted Answer

This is known as the "unrelated use rule" and is outlined in IRS Publication 526. If donated appreciated capital gain property is not used for the charitable purposes of the organization, the contribution must be reduced by the amount of the long-term capital gain that would have been incurred if the property had been sold at fair market value.

Question 14

For 2015, taxpayers may take an above-the-line deduction for the amount of mortgage insurance premium paid in 2015.

Accepted Answer

The answer of For 2015, taxpayers may take an above-the-line...

Question 15

Theft losses are deducted in the tax year in which the theft was discovered, rather than the year of theft, if the discovery comes later.

Accepted Answer

A theft loss is deducted in the tax year in which the theft was discovered, even if it occurred in a previous year.

Question 16

A taxpayer receives a deduction for services rendered to a charitable organization.

Accepted Answer

A taxpayer cannot deduct the value of services rendered to a charitable organization; only out-of-pocket expenses related to providing those services (like supplies or mileage) can be deducted.

Question 17

Premiums paid for long-term care insurance policies may be deductible as medical expenses.

Accepted Answer

Premiums paid for qualified long-term care insurance policies may be deductible as medical expenses. However, the amount deductible is subject to limitations based on the age of the taxpayer.

Question 18

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

Accepted Answer

This is true according to IRS regulations. If the charitable contribution exceeds the adjusted gross income limitation, the excess amount may be carried forward for up to five years and deducted in future tax years.

Question 19

Prescription drugs obtained outside the United States, such as from Canada, are never deductible on a U.S. tax return.

Accepted Answer

Prescription drugs obtained outside the United States may be deductible on a U.S. tax return under certain circumstances. For example, if the drugs were not available in the U.S. and were obtained under the supervision of a U.S. licensed medical practitioner, they may be deductible as a medical expense. However, it is important to consult with a tax professional for guidance on deductibility.

Question 20

For medical expenses, only expenses in excess of 7.5 percent of adjusted gross income are deductible.

Accepted Answer

The answer of For medical expenses, only expenses in excess...

Quiz 5: Itemized Deductions