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Exam 10: Individuals: Income, deductions, and Credits

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Question 61

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Brian,a self-employed individual,pays state income tax payments of: $900 on January 15,2015 (4th estimated tax payment for 2014) $1,000 on April 15,2015 (1st estimated tax payment in 2015) $1,000 on June 16,2015 (2nd estimated tax payment in 2015) $1,000 on September 15,2015 (3rd estimated tax payment in 2015) $800 on January 15,2016 (4th estimated tax payment of 2015) Brian had a tax overpayment of $500 on his 2014 state income tax return and applied this to his 2015 state income taxes.What is the amount of Brian's state income tax itemized deduction for his 2015 Federal income tax return?

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$4,400 is the itemiz...

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Question 62

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Paula transfers stock to her former spouse,Fred.The transfer is pursuant to a divorce agreement.Paula's cost of the stock was $75,000 and its fair market value on the date of the transfer is $95,000.Fred later sells the stock for $100,000.Fred's recognized gain from the sale of the stock is $5,000.

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Question 63

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Jacob and Emily were co-owners of a personal residence.As part of their divorce agreement,Emily paid Jacob cash for his interest in the personal residence.This cash payment results in a taxable gain to Jacob if he receives more cash than his share of the cost of the residence.

Upon the recommendation of a physician,Ed has a swimming pool installed at his residence because of a heart condition.If he is allowed to deduct all or part of the cost of the pool,Ed's increase in utility bills due to the operation of the pool qualifies as a medical expense.

In 2016,Rhonda received an insurance reimbursement for medical expenses incurred in 2015.She is not required to include the reimbursement in gross income in 2016 if she claimed the standard deduction in 2015.

Ted earned $150,000 during the current year.He paid Alice,his former wife,$75,000 in alimony.Under these facts,the tax is paid by the person who benefits from the income rather than the person who earned the income.

Theresa sued her former employer for age,race,and gender discrimination.She claimed $200,000 in damages for loss of income,$300,000 for emotional harm,and $500,000 in punitive damages.She settled the claim for $700,000.As a result of the settlement,Theresa must include in gross income:

Brad,who uses the cash method of accounting,lives in a state that imposes an income tax (including withholding from wages) .On April 14,2015,he files his state return for 2014,paying an additional $600 in state income taxes.During 2015,his withholdings for state income tax purposes amount to $3,550.On April 13,2016,he files his state return for 2015 claiming a refund of $800.Brad receives the refund on June 3,2016.If he itemizes deductions,how much may Brad claim as a deduction for state income taxes on his Federal income tax return for calendar year 2015 (filed in April 2016) ?

Charitable contributions that exceed the percentage limitations for the current year can be carried over for up to three years.

Fees for automobile inspections,automobile titles and registration,bridge and highway tolls,parking meter deposits,and postage are not deductible if incurred for personal reasons,but they are deductible as deductions for AGI if incurred as a business expense by a self-employed taxpayer.

Bob and Sally are married,file a joint tax return,report AGI of $114,000,and have two children.Del is beginning her freshman year at State College during Fall 2015,and Owen is beginning his senior year at Southwest University during Fall 2015.Owen completed his junior year during the Spring semester of 2014 (i.e. ,he took a "leave of absence" during the 2014-2015 school year) .Both Del and Owen are claimed as dependents on their parents' tax return.Del's qualifying tuition expenses and fees total $5,000 for the Fall semester,while Owen's qualifying tuition expenses were $6,100 for the Fall 2015 semester. Del's room and board costs were $3,200 for the Fall semester.Owen did not incur room and board costs,as he lived with his aunt and uncle during the year.​ Full payment is made for the tuition and related expenses for both children at the beginning of each semester.In addition to the children's college expenses,Bob also spent $3,000 on professional education seminars during the year in order to maintain his license as a practicing dentist.Bob attended the seminars during July and August 2015.Compute the available education tax credits for Bob and Sally for 2015.

Under the alimony rules:

Assuming a taxpayer qualifies for the exclusion treatment,the interest income on educational savings bonds:

Gambling losses may be deducted to the extent of the taxpayer's gambling winnings.Such losses are subject to the 2% floor for miscellaneous itemized deductions.

Pedro's child attends a school operated by the church the family attends.Pedro made a donation of $1,000 to the church in lieu of the normal registration fee of $200.In addition,Pedro paid the regular tuition of $6,000 to the school.Based on this information,what is Pedro's charitable contribution?

Harry and Sally were divorced three years ago.In July of the current year,their son,Joe,broke his arm falling out of a tree.Joe lives with Sally and Sally claims him as a dependent on her tax return.Harry paid for the medical expenses related to Joe's injury.Can Harry claim the medical expenses he paid for Joe on his tax return?

Sergio was required by the city to pay $2,000 for the cost of new curbing installed by the city in front of his personal residence.The new curbing was installed throughout Sergio's neighborhood as part of a street upgrade project.Sergio may not deduct $2,000 as a tax,but he may add the $2,000 to the basis of his property.