Below I have a sample tax return problem to be solved. I have written whether the entry is deductible, non deductible, Included/Excluded or so on. I need help in determine whether I answered the problems correctly. I provided reasoning for my answer too. I need you review my work and determine the correct response and provide a reason.

Tax Return Problems

Denise Lopez, age 40, is single and has no dependents. She is employed as a legal secretary by Legal Services, Inc. She owns and operates Typing Services located near the campus of Florida Atlantic University at 1986 Campus Drive, Boca Raton, FL 33434. Denise is a material participant in the business, she is a cash basis taxpayer, and her Social Security number is 123-45-6781. Denise lives at 2020 Oakcrest Road, Boca Raton, FL 33431. Denise wants to designate $3 to the Presidential Election Campaign Fund. She has never owned or used any virtual currency. Denise received the appropriate coronavirus recovery rebates (economic impact payments); related questions in ProConnect Tax should be ignored. During 2021, Denise had the following income and expense items:

1 .$100,000 salary from Legal Services, Inc.

Wages Income

Form 1040

2. 20,000 gross receipts from her typing services business.

Business self employed income

On Schedule C

3. $700 interest income from Third National Bank.

4. Taxable Interest Income from Savings Interest Account

My question: Is $700 interest income taxable even though the IRS minimum taxable interest income is $1500?

Do you still include the amount on Schedule B?

Here is the link link https://www.irs.gov/forms-pubs/about-schedule-b-form- 1040#:~:text=Use%20Schedule%20B%20(Form%201040,accrued%20interest%20from%20a%20bond.

5, $1,000 Christmas bonus from Legal Services, Inc.

The 1,000 dollars is treated as compensation from employer, Gross Income Inclusions

Include in 1040.

6. $60,000 life insurance proceeds on the death of her sister.

Life insurance proceeds paid to beneficiary are not taxable (Excluded).

My question: Even though life proceeds are excluded, does the IRS require taxpayers to write the amount on to the forms?

7. $5,000 check given to her by her wealthy aunt.

The check is considered a gift. For year 2018-2021, the annual exclusion for each donee is $15,000. So, the $5,000 check is non-taxable.

8. $100 won in a bingo game.

Non taxable, but still have to report earnings on 1040 form as other income. The 100 dollars is under $5,000

9. Expenses connected with Typing Services:

Office rent	$7,000
Supplies	4,400
Utilities and telephone	4,680
Wages to part-time typists	5,000
Payroll taxes	500
Equipment rentals	3,000

As a sole properier, how to determine which expenses are not deductible and deductible towards her business? Assume this problem is for tax year 2021.

Is there limitations to deducting miscallenous expenses? Maybe 2 percent of AGI?

How to determine schedule these expenses go on?

10. $9,500 interest expense on a home mortgage (paid to Boca Raton Savings and Loan).

All of the $9,500 interest expense is deductible up to $750,000 mortgage interest limitation, Tax Jobs Tax Cuts 2017

11. $15,000 fair market value of silverware stolen from her home by a burglar on October 12, 2021. Denise had paid $14,000 for the silverware on July 1, 2011. She was reimbursed $10,000 by her insurance company.

FMV= 15,000 Silverware Cost=14,000

Insurance Reimbursed=10,000

12. Theft loss is the lesser of Adjusted Basis or FMV which is $15,000

Since the Tax Jobs Act of 2017 Thefts losses are not deductible unless a Federally Disaster is declared.

nsurance Settlement $10,000 < Basis 14,000< $15,000 FMV OF Asset

13. Casualty loss deduction is $-6612 [14,000 basis 10,000 insurance recovery $100 floor $10,512(10% $ $105, 120 AGI)].

Denise had loaned $2,100 to a friend, Joan Jensen, on June 3, 2017. Joan declared bankruptcy on August 14, 2021, and was unable to repay the loan. Assume that the loan is a bona fide debt.

Even though Denise loaned $2100 to friend Joan and she file bankruptcy, the loan is a bad debt and cannot be deduct, because Denise is using the cash basis method which she cannot take the deduction when she cannot recognize any income.

The non-business debt is treated as a short term capital loss up to $3,000.

14. Legal Services, Inc., withheld Federal income tax of $15,000 and the appropriate amount of FICA tax from her wages.

This amount is on the 1040 Form to determine tax due or refund.

15. Alimony of $10,000 received from her former husband, Omar Guzman; divorce was finalized on December 2, 2013, and no changes have been made to the divorce decree since that time.

According to the Tax Jobs Act of 2017 Alimony payments are not included in gross income.

16. Interest income of $800 on City of Boca Raton bonds.

Interest earned on City bonds are tax exempt. So, the interest income is $0

17. Denise made estimated Federal tax payments of $2,000.

18. Sales taxes from the sales tax table of $953.

19. Property taxes on her residence of $3,200.

The full amount of $3200 is deductible.

My reasoning is The Tax Cuts and Jobs Act capped the deduction for state and local taxes, including property taxes, at $10,000 ($5,000 if youre married and filing separately).

Property Taxes deductions goes on Schedule A, FOR AGI

20. Charitable contribution of $2,500 to her alma mater, Citrus State College.

The IRS allows 100 percent deduction of charitable contributions for 2020 and 2021.

21. On November 1, 2021, Denise was involved in an automobile accident. At the time of the accident, her automobiles FMV was $45,000. After the accident, the automobiles FMV was $38,000. Denise acquired the car on May 2, 2020, at a cost of $52,000. Denises car was covered by insurance, but because the policy had a $5,000 deduction clause, Denise decided not to file a claim for the damage$15,000 fair market value of silverware stolen from her home by a burglar on October 12, 2021. Denise had paid $14,000 for the silverware on July 1, 2011. She was reimbursed $10,000 by her insurance company.

FMV= 15,000 Silverware Cost=14,000 Insurance Reimbursed=10,000

Theft loss is the lesser of Adjusted Basis or FMV which is $14,000

Insurance Settlement $10,000 < Basis 14,000< FMV OF Asset

Casualty loss deduction is $-6612 [14,000 basis 10,000 insurance recovery $100 floor $10,512(10% $ $105, 120 AGI)].

Automobile Accidents are considered casualty losses. However, according to the Tax Jobs Act of 2017, casuality loss that are not Federally Disaster Declared is not deductible.