Chapter 10: ACC 4301

1. Carlos donated a painting to Goodwill Industries, a qualified charity. Carols purchased the painting 5 months ago for $2,000 and it has a fair market value of $3,000 on the date of donation. What is the amount of Carlos' charitable contribution deduction?

a $0

b. $1,000

c. $2,000

d. $3,000

2. Pat is a cash basis taxpayer who had $1,000 of state income tax withheld from her salary in 2015. In addition, during 2015 she received a refund of 2014 state income taxes of $250 (she did not itemize deductions in 2014). During 2015, Pat also made estimated state income tax payments of $600. What is Pat's 2015 state income tax deduction?

A $750

B $1,000

C $1,350

D $1,600

3. Eric, who is single and has no dependents, had adjusted gross income of $80,000 in 2012, comprised of the following:

Salary $85,000

Net investment income $6,000

During 2012, Eric made the following payments:

Interest on margin account to stockbroker $18,000

Real estate taxes on a condominium (owned by Erics mother, in which Eric resides) $3,000

State and city gasoline taxes $180

Medical insurance premiums $300

State income tax $3,200

Unreimbursed dental expenses $4,500

Contribution to political committee of elected public official $500

4. Eric elected to itemize his deductions for 2012. How much can Eric claim in his itemized deductions for medical and dental expenses on his 2012 return?

A $0

B $3,200

C $300

D $2,400

5. Tina volunteers at the American Red Cross monthly during the current year. She would normally charge $400 per month for the type of work performed. Tina drove 1,800 miles to the American Red Cross office during the year. What is the amount of Tina's charitable contribution deduction?

A $814

B $0

C $652

D $252

6. Eric, who is single and has no dependents, had adjusted gross income of $80,000 in 2012, comprised of the following:

Salary $85,000

Net investment income $6,000

During 2012, Eric made the following payments:

Interest on margin account to stockbroker $18,000

Real estate taxes on a condominium (owned by Erics mother, in which Eric resides) $3,000

State and city gasoline taxes $180

Medical insurance premiums $300

State income tax $3,200

Unreimbursed dental expenses $4,500

Contribution to political committee of elected public official $500

Eric elected to itemize his deductions for 2012. How much can Eric claim as taxes in itemized deductions on his 2012 return (disregarding any state sales taxes)?

A $3,200

B $6,200

C $6,380

D $3,180

7. Amy (age 56) purchases a house in Hawaii for use as a vacation home (100% personal use) on January 1, 2010, for $500,000. She uses it as a vacation home for 3 years, when she makes it her principal residence. Assume she continues to use it as her principal residence until she sells it two years later (Amy will have owned the house a total of 5 years) for $850,000 (with selling expenses of $50,000). Amys realized gain is calculated as follows:

Amount realized ($850,000 - $50,000) $800,000

Adjusted basis (500,000)

Realized gain $300,000

What is Amys recognized gain on the sale of this house?

A $180,000

B $300,000

C $50,000

D $120,000

8. During the current year, Tim paid $72 for California license plates for his automobile. California plates are sold at a fee of $30 plus $2 per hundred-dollar valuation of the automobile. Assuming Tim itemizes his deductions, how much, if any, may Tim claim as a deduction for taxes?

A $30

B $0

C $42

D $72

9. Carol, a resident of San Diego, travels with her dependent sick mother to see a specialist in San Francisco for medical treatment. The cost of the trip includes $400 ($200 each) for airfare and $450 for lodging in San Francisco for three nights. Disregarding the percentage limitation, what is Carol's medical deduction for this trip?

A $0

B $700

C $850

D $400

10. Gene owns his own home, which he bought several years ago. His original mortgage, which was used to buy the house, is $150,000. In the current year, he obtains a home equity loan on the house of $90,000. The interest on the original mortgage is $15,000 and on the new loan is $10,000. The fair market value of the house is $325,000. How much of this interest is deductible as qualified residence interest?

A $25,000

B$10,000

C $0

D $15,000

11. Lupe (age 43), who is married and self-employed, carries a high-deductible medical insurance policy with a deductible of $4,000. In addition, she has established an HSA. What is Lupe's maximum annual deductible contribution to the HSA in 2015?

A$4,000

B $0

C $6,650

D $2,250

12. Jason, a single taxpayer, had adjusted gross income of $70,000 in 2015. During the year, he contributed to his church, a 50 percent organization, $15,000 in cash and land he had purchased 10 years ago for $16,000 with a current fair market value of $30,000. What are Jason's 2015 charitable contribution deduction and his carryover to 2016, disregarding any special elections?

A $31,000 current year; $0 carryonver

B $35,000 current year; $10,000 30% property carryover

C $35,000 current year; $1,000 50% property and $9,000 30% property carryover

D $31,000 current year; $10,000 50% property carryover

13. Scott sells his home to Ben for $200,000. After the sale, Ben pays the real estate taxes of $3,600 for the calendar year. For income tax purposes, the deduction is apportioned $2,100 to Scott and $1,500 to Ben. Assuming the real estate taxes are not prorated in escrow, what is Ben's basis in the residence?

A $202,100

B $200,000

C $201,500

D $198,500

14. What is the maximum value of property contributions that a taxpayer may make to qualified organizations without being required to have written acknowledgment of the gift?

A $0

B $250

C $249

D $500

15. Anna purchased a new residence on January 5, 2015, for $150,000 and paid points of $4,500 to obtain mortgage financing. The mortgage is for 30 years. Her regular interest on the mortgage for the year was $6,500. What is the maximum amount Anna can deduct for interest on her home in 2015?

A $11,000

B $6,650

C $4,500

D $6,500

16. Cecil is a resident of a state that imposes a state income tax. During the year, Cecil had the following transactions in regards to his state income taxes: $6,000 taxes withheld, $1,000 last year's state income tax refund, $2,000 estimated payments, and $3,000 tax deficiency paid related to two years ago. If Cecil itemizes his deductions, how much may be claimed as a deduction for state income taxes on Schedule A?

A $11,000

B $7,000

C $8,000

D $10,000

17. Terry donated $650 of his time as a painter and paint with a cost basis to him of $200, to help fix up his church. What is the amount of Terry's charitable contribution deduction?

A $850

B $200

C $650

D $0

18. Tom donated shares of Texaco stock to his church in satisfaction of last year's church pledge. Tom purchased the stock as an investment two years ago. The stock cost Tom $2,300 and possessed a fair market value of $2,700 on the date of donation. What is the amount of Tom's charitable contribution deduction?

A $2,500

B $2,300

C $2,700

D $0

19. Janelle paid $7,500 of interest during the current year consisting of $2,500 on her primary residence, $1,000 on her second residence, $2,000 on investment property, which generated no income during the year, $1,500 on her sister's primary residence, and $500 on her brother's credit cards. What is Janelle's current year interest deduction before any limitations?

A $7,500

B $5,500

C $7,000

D $3,500

20. Steve borrows $150,000 at 10 percent interest on January 3, 2015. The proceeds are used to purchase $100,000 worth of raw land and $50,000 worth of stock in Exxon. During 2015, the stock pays dividends of $2,500. Steve has deductible expenses on this investment property of $500 (after considering the 2 percent of adjusted gross income limitation). Assuming Steve pays interest of $15,000 (10 percent of $150,000) in 2015, how much is deductible?

A $2,500

B $2,000

C $12,500

D $15,000

21. Ted donated a painting to Goodwill Industries, a qualified charity. Ted purchased the painting 5 years ago for $2,000 and it has a fair market value of $3,000 on the date of donation. Goodwill plans to sell the paining to raise funds for its charitable work. What is the amount of Ted's charitable contribution deduction?

A $1,000

B $3,000

C $0

D $2,000

22. Big Booster gives $1,500 to his alma mater's athletic department. The contribution entitles him to purchase four football tickets for $50 each. What is Big's charitable contribution deduction?

A $1,040

B $1,300

C $1,200

D $1,500

23. Mary, age 42, had adjusted gross income of $30,000 and she paid the following medical expenses: $500 medical insurance, $600 dental charges, $1,000 physicians' charges, $850 prescription drugs, and $400 hospital costs. Assuming Mary itemizes deductions, what is Mary's medical expense deduction?

A $350

B $2,000

C $2,600

D $0

24. For 2015, what is the maximum interest deduction on a qualified student loan?

A $2,500

B $2,000

C $1,500

D $1,000

25. Doreen is a resident of California. During the year, Doreen had the following transactions in regards to her state income taxes: $4,000 state taxes withheld (California), $3,000 amount paid with last year's California tax return, $2,000 estimated payments (California), and $3,000 nonresident income taxes paid to the state of Arizona. If Doreen itemizes her deductions, how much may be claimed as a deduction for state income taxes on Schedule A?

A $9,000

B $7,000

C $4,000

D $12,000

26. In 2015, Dale had the following income and deductions: $200,000 salary, $35,450 interest income, $15,000 state income taxes, $13,000 qualified residence interest, and $14,000 charitable contributions. Assuming Dale is single, what is the net amount of itemized deductions that she may claim on her federal income tax return?

A $28,000

B $15,000

C $42,000

D $29,000

27. Saul, a self-employed individual taxpayer, paid the following amounts: $2,000 state income tax, $4,000 Federal income tax, $1,000 real estate tax on land in Ireland, $500 state sales tax, and $150 CPA license fee. What amount can Saul deduct as an itemized deduction for taxes (assuming he elects to deduct his state income taxes)?

A $2,000

B $1,650

C $3,500

D $3,000

28. Apart from the joint-return test, Xavier would qualify as Zack's dependent. Zack paid the following medical expenses: $2,000 operation for Xavier, $1,200 prescription drugs for Zack, $3,000 Zack's dentist bills, and $2,500 for Xavier's membership in a health spa. Disregarding the percentage limitation, what is the total of Zack's deductible medical expenses?

A $4,200

B $5,000

C $8,700

D $6,200

29. Which of the following items will not qualify as a medical expense deduction?

A) Insulin

B) Transportation to and from a doctor's office

C) Eyeglasses

D) A trip to Arizona for the general improvement of the taxpayer's health.

30. The prepaid interest rules of IRC Section 461(g) apply to all prepaid interest payments except which of the following?

A) Construction loans

B) Points on the purchase of a rental house

C) Points paid by a buyer of a personal residence

D) Bank auto loans