ACC 555 Week 11 Final Exam – Strayer New
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Chapters 7
Through 14
Prentice Hall's Federal Taxation 2015
Comprehensive, 28e
(Pope)
Chapter
7 Itemized Deductions
1) For
individuals, all deductible expenses must be classified as deductions for AGI
or deductions from AGI.
2) In 2014,
medical expenses are deductible as a from AGI deduction to the extent
that they exceed 7.5 percent of the taxpayer's AGI.
3) Medical
expenses paid on behalf of an individual who could be the taxpayer's dependent
except for the gross income or joint return tests are deductible as itemized
deductions.
4) Medical
expenses incurred on behalf of children of divorced parents are deductible by
the parent who pays the expenses but only if that parent also is entitled to
the dependency exemption.
5) The
definition of medical care includes preventative measures such as routine
physical examinations.
6) Due to stress
on the job, taxpayer Charlie began to experience chest pains. In order to relax
and relieve the pains, he and his spouse went on an ocean cruise. The cost of
the cruise to alleviate this medical condition is tax deductible.
7) Expenditures
for a weight reduction program are deductible if recommended by a physician to
treat a specific medical condition such as hypertension caused by excess
weight.
8) In order for
a taxpayer to deduct a medical expense, the amount must be paid to a certified
medical doctor (M.D.).
9) Jeffrey, a
T.V. news anchor, is concerned about the wrinkles around his eyes. Because it
is job-related, the cost of a face lift to eliminate these wrinkles is a
deductible medical expense.
10) Expenditures
for long-term care insurance premiums qualify as a medical expense deduction
subject to an annual limit based upon the age of an individual.
11) Capital
expenditures for medical care which permanently improve or better the
taxpayer's property are deductible to the extent the cost exceeds the increase
in fair market value to the property attributable to the capital expenditure.
12) Expenditures
incurred in removing structural barriers in the home of a physically
handicapped individual are deductible only to the extent the cost exceeds the
increase in fair market value to the property attributable to the capital
expenditure.
13) If the
principal reason for a taxpayer's presence in an institution is the need and
availability of medical care, the entire cost of lodging and meals is
considered qualified medical expenditures.
14) A medical
expense is generally deductible only in the year in which the expense is
actually paid.
15) If a
prepayment is a requirement for the receipt of the medical care, the payment is
deductible in the year paid rather than the year in which the care is rendered.
16) If a medical
expense reimbursement is received in a year after a deduction has been taken on
a previous year's return, the previous year's return must be amended to
eliminate the reimbursed expense.
17) Assessments
or fees imposed for specific privileges or services are not deductible as
taxes.
18) Foreign real
property taxes and foreign income taxes are not deductible as itemized
deductions.
19) A personal
property tax based on the weight of the property is deductible.
20) Assessments
made against real estate for the purpose of funding local improvements are not
deductible in the year paid but rather should be added to the cost basis of the
property.
21)
Self-employed individuals may deduct the full self-employment taxes paid as a for
AGI deduction.
22)
Finance charges on personal credit cards are considered interest and are,
therefore, deductible.
23)
In general, the deductibility of interest depends on the purpose for which the
indebtedness is incurred.
24)
Interest expense incurred in the taxpayer's trade or business is deductible as
a for AGI deduction without limitation if the taxpayer materially
participates in the business.
25)
Investment interest expense which is disallowed because it exceeds the
taxpayer's net investment income may be carried over and treated as incurred in
subsequent years.
26)
Investment interest includes interest expense incurred to purchase tax-exempt
securities.
27)
Taxpayers may elect to include net capital gain as part of investment income.
28)
Taxpayers may not deduct interest expense on most personal debt, including
credit card debt, car loans, and other consumer debt.
29)
Qualified residence interest consists of both acquisition indebtedness and home
equity interest.
30)
Acquisition indebtedness for a personal residence includes debt incurred to
substantially improve the residence.
31)
A taxpayer is allowed to deduct interest expense incurred on home equity
indebtedness limited to the lesser of $100,000 or the home equity (FMV of the
residence less the acquisition indebtedness).
32)
While points paid to purchase a residence are deductible as interest in the
period paid, points associated with the refinancing of a residence must be
amortized and deducted over the life of the loan.
33)
Christopher, a cash basis taxpayer, borrows $1,000 from ABC Bank by issuing a
3-month note on December 1, 2014. Christopher receives $940 but must repay
$1,000 on the due date. The amount of interest expense deductible in 2014 is
$20.
34)
Charitable contributions made to individuals are deductible if the individuals
can show extreme financial need.
35)
For charitable contribution purposes, capital gain property includes property
which, if sold, would produce a long-term capital gain.
36)
A charitable contribution deduction is allowed for the FMV of services rendered
to a qualified charitable organization.
37)
A charitable contribution in excess of the deduction limit for one taxable year
can be carried forward five years.
38)
If a taxpayer makes a charitable contribution to a university and in return
receives the right to purchase tickets to athletic events, the taxpayer may
deduct only 80% of the payment.
39)
An accrual-basis corporation can only deduct contributions made by year-end.
40)
Corporate charitable deductions are limited to 10% of the corporation's taxable
income for the year.
41)
Legal fees for drafting a will are generally deductible.
42)
A taxpayer can deduct a reasonable amount for small out-of-pocket (i.e. cash)
donations.
43)
Van pays the following medical expenses this year:
• $1,500
for doctor bills for Van's son who is claimed as a dependent by Van's former
spouse.
• $300
for Van's eyeglasses.
• $900
for Van's dental work.
• $3,800
for Van's face lift. Van, a newscaster, is worried about the wrinkles around
his eyes.
How
much can Van include on his return as qualified medical expenses before
limitation?
A)
$1,200
B)
$2,400
C)
$2,700
D)
$6,500
44)
All of the following are deductible as medical expenses except
A)
vitamins and health foods that improve a taxpayer's general health.
B)
payments for a vision exam and contact lenses.
C)
payments to a hospital for laboratory fees and X-rays for diagnosis of a
medical problem.
D)
cosmetic surgery necessary to correct a deformity arising from a congenital
abnormality.
45)
All of the following payments for medical items are deductible with the
exception of the payment for
A)
insulin.
B)
general appointment for teeth cleaning.
C)
acupuncture for specific medical purposes.
D)
nonprescription medicine for treatment of a specific medical condition.
46)
In 2014 Sela traveled from her home in Flagstaff to San Francisco to seek
medical care. Because she was unable to travel alone, her mother accompanied
her. Total expenses included:
|
Hotel
room en route ($150 × 2 rooms × 3 nights)
|
$900
|
|
Mileage,
1,000 miles
|
|
|
Doctors
bills in San Francisco
|
1,600
|
The
total medical expenses deductible before the 10% limitation are
A)
$1,600.
B)
$2,135.
C)
$2,500.
D)
$2,460.
47)
Leo spent $6,600 to construct an entrance ramp and to widen doorways in his
personal residence to make the home accessible for his wife, who is disabled
and confined to a wheelchair. The $6,600 expenditure increased the value of the
residence by $2,000. How much of the $6,600 is a deductible medical expense
(before considering limits based on AGI)?
A)
$0
B)
$2,000
C)
$4,600
D)
$6,600
48)
Linda had a swimming pool constructed at her house. Her physician advised and
prescribed to her that the pool would slow the effects of her degenerative disease.
The pool was not suitable for recreational use. Prior to the construction of
the pool, the fair market value of her house was $172,000. After the
construction of the pool, the appraised fair market value of the house was
$181,000. The cost of the pool was $13,000. What is the amount of Linda's
qualified medical expense (before considering limits based on AGI)?
A)
$0
B)
$4,000
C)
$9,000
D)
$13,000
49)
Alan, who is a security officer, is shot while on the job. As a result, Alan
suffers from a chronic leg injury and must use a wheelchair and undergo therapy
to regain and retain strength. Alan's physician recommends that he install a
whirlpool bath in his home for therapy. During the year, Alan makes the
following expenditures:
|
Wheelchair
|
$ 1,200
|
|
Whirlpool
bath
|
2,000
|
|
Maintenance
of the whirlpool
|
250
|
|
Increased
utility bills associated with whirlpool
|
450
|
|
Entrance
ramp, various home modifications
|
7,200
|
A
professional appraiser tells Alan that the whirlpool has increased the value of
his home by $1,000. Alan's deductible medical expenses (before considering
limitations based on AGI) will be
A)
$6,000.
B)
$10,100.
C)
$7,000.
D)
$7,700.
50) Mitzi's medical expenses
include the following:
|
Medical
premiums
|
$10,850
|
|
Doctors
fees
|
2,000
|
|
Hospital
fees
|
3,350
|
|
Prescription
drugs
|
600
|
|
Eyeglasses
|
350
|
|
General
purpose vitamins
|
100
|
Mitzi's
AGI for the year is $33,000. She is single and age 49. None of the medical costs are reimbursed by
insurance. After considering the AGI floor, Mitzi's medical expense deduction
is
A)
$12,900.
B)
$13,850.
C)
$14,675.
D)
$16,325.
51) Caleb's medical expenses
before reimbursement for the year include the following:
|
Medical
premiums
|
$11,000
|
|
Doctors,
hospitals
|
3,500
|
|
Prescriptions
|
600
|
Caleb's
AGI for the year is $50,000. He is single and age 58. Caleb also receives a reimbursement for
medical expenses of $1,000. Caleb's deductible medical expenses that will be
added to the other itemized deduction will be
A)
$10,350.
B)
$9,100.
C)
$14,500.
D)
$15,100.
52) A review of the 2014 tax file
of Gregory, a single taxpayer who is age 40, provides the following information
regarding Gregory's 2014 tax status:
|
Adjusted
gross income
|
$40,000
|
|
Medical
expenses (before percentage limit)
|
5,000
|
|
Itemized
deductions other than medical
|
5,400
|
|
2014
potential standard deduction
|
6,200
|
In
2015, Gregory receives a reimbursement for last year's medical expenses of
$1,200. As a result, Gregory must
A)
include $200 in gross income for 2015.
B)
include $1,200 in gross income for 2015.
C)
reduce 2015's medical expenses by $1,200.
D)
amend the 2014 return.
53) Mr. and Mrs. Thibodeaux, who are
filing a joint return, have adjusted gross income of $75,000. During the tax
year, they paid the following medical expenses for themselves and for Mrs.
Thibodeaux's mother, Mrs. Watson (age 63). Mrs. Watson provided over one-half
of her own support.
|
Prescription
drugs for Mr. Thibodeaux
|
$3,600
|
|
General
vitamins for Mrs. Thibodeaux
|
$ 100
|
|
Doctor
bill for Mr. Thibodeaux
|
$1,800
|
|
Doctor
bill for Mrs. Thibodeaux
|
$4,000
|
|
Hospital
bill for Mrs. Watson
|
$2,200
|
Mr.
and Mrs. Thibodeaux received no reimbursement for the above expenditures. What
is the amount of their deductible itemized medical expenses?
A)
$1,900
B)
$2,000
C)
$4,100
D)
$9,400
54) Mr. and Mrs. Gere, who are filing a
joint return, have adjusted gross income of $50,000. During the tax year, they
paid the following medical expenses for themselves and for Mrs. Gere's mother,
Mrs. Williams. The Gere's could claim Mrs. Williams as their dependent, but she
has too much gross income.
|
Insulin
for Mr. Gere
|
$1,000
|
|
Health
insurance premiums for Mrs. Gere
|
$3,100
|
|
Hospital
bill for Mrs. Williams
|
$5,200
|
|
Doctor
bill for Mrs. Gere
|
$4,000
|
Mr. and Mrs. Gere received no
reimbursement for the above expenditures. What is the amount of their
deductible itemized medical expenses?
A)
$5,200
B)
$8,300
C)
$4,300
D)
$13,300
55)
The following taxes are deductible as itemized deductions with the exception
of
A)
state income taxes.
B)
federal income taxes.
C)
foreign real property taxes.
D)
local personal property taxes.
56) Matt paid the following taxes
in 2014:
|
Real
estate taxes on rental property he owns
|
$4,000
|
|
Real
estate taxes on his own residence
|
3,600
|
|
Federal
income taxes
|
8,000
|
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