T or F 1. For 2020, the amount of the student loan interest deduction is limited to $2,500.
T or F 2. Under a divorce agreement executed in 2017, periodic payments of either cash or
property must be made at regular intervals to be deductible as alimony.
T or F 3. With a Health Savings Account (HSA), contributions grow tax free, however
distributions used for to pay for medical expenses are taxable.
T or F 4. The cost of a prescription cough medicine is a deductible
medical expense.
T or F 5. Taxpayers can deduct qualified residence interest on their principal residence and
on a second residence selected by the taxpayer if debt is $750,000 or less.
T or F 6. To deduct a charitable contribution, taxpayers must contribute cash to the
charity.
T or F 7. Fines paid that are ordinary, necessary and reasonable in a trade or business
are not deductible.
T or F 8. The luxury auto limits on depreciation must be reduced if business use is less than
100%.
T or F 9. The standard mileage rate does not include parking fees, tolls, and property taxes
on the vehicle
T or F 10. Transportation costs are deductible when a taxpayer goes from home to his
or her regular workplace.
11. In 2015 through 2018, Shana borrowed a total of $50,000 for higher education expenses on qualified education loans. In 2020, while living at home and being claimed by her parents as a dependent, she began making payments on the loan. The first year interest on the loan was reported as $2,750. The amount that Shana can claim on her tax return is:
A) $2,500
B) $0.
C) $1,500.
D) $1,750.
12. The percentage of self-employment tax that could be deductible as a for AGI deduction is:
A) 50%.
B) 80%.
C) 70%.
D) 100%.
13. Under a court-ordered decree of separate maintenance executed in 2017, Pillar is required to pay her ex-husband, Miguel, $4,750 alimony per month and also child support of $2,100 per month until the child turns age 18. How much of each payment is deductible by Pillar as alimony for 2020?
A) $2,100.
B) $4,750.
C) $6,850.
D) $0.
14. Under a 2017 divorce decree, Duron is required pay $1,000 of alimony each month for the next 10 years. In addition, Duron makes a voluntary payment of $200 per month. How much of the total monthly payments are deductible by Duron?
A) $1,200.
B) $0.
C) $200.
D) $1,000.
15. Mr. Mugabi must use a wheelchair. Upon advice from his physician, he installed an elevator and widened the front entrance of his house in 2020, incurring $10,000 and $9,000 in costs, respectively. Mr. Mugabi originally purchased his house for $202,000. An appraisal showed the fair market value of Mr. Mugabi’s house immediately after these modifications at $212,000. Compute his currently deductible medical expense in regards to these improvements before AGI limitations.
A) $19,000.
B) $0.
C) $9,000.
D) $10,000.
16. For the current year, Gina Hestopolis had adjusted gross income of $100,000. During the year, she contributed cash of $16,000 to her church and an additional $3,000 to qualified charities. She also contributed religious artwork that she owned for 10 years with a fair market value of $28,000 and a basis of $20,000 to a museum. The museum intends to display the religious artwork. If Gina chooses to itemize her deductions, what is the amount of her deductible charitable contribution in the current year?
A) $47,000.
B) $19,000.
C) $39,000.
D) $28,000.
E) $30,000.
17. In 2020, Maria who is 66, had adjusted gross income of $27,000, paid the following medical expenses:
Prescription medicines
$
275
Dentist and doctor expenses
1,350
Health insurance premiums
400
Two pair of eyeglasses
185
What amount can Maria deduct as medical expenses (before the adjusted gross income limitation) in calculating her itemized deductions for 2020?
A) $2,210.
B) $2,025.
C) $185.
D) $0.
18. Frank is a resident of a state that imposes a tax on income. The following information pertaining to Frank’s state income taxes is available:
State income taxes withheld in 2020
$3,900
Refund of 2018 tax received in 2020
$ 500
Mistake on 2016. Assessed and paid in 2020 for 2016:
Tax
$ 700
Interest
$ 100
What amount should Frank use as state and local income taxes in calculating itemized deductions for his 2020 Federal tax return, assuming he elects to deduct state and local income taxes?
a.
$4,100
b.
$4,600
c.
$4,700
d.
$4,200
19. On May 26, 2016, Jamal purchased machinery for $30,000 to be used in his business. He did not elect to expense the equipment under 179 or the bonus. On October 10, 2020, he sells the machinery to a scrap metal dealer. What is his cost recovery deduction for 2020 rounded to the nearest dollar?
A) $0.
B) $1,340.
C) $2,679.
D) $4,287.
E) None of the above.
20. Patricia, a professional gambler, had the following income and expenses in her business:
Gambling winnings
$
275,000
Expenses
Fees paid for illegal information
28,000
Travel costs
$
8,000
Office expenses
5,000
Supplies
3,000
Business long-distance phone charges
900
Tickets for illegal parking
1,000
How much net income must Patricia report from this business?
A) $258,100.
B) $229,100.
C) $240,000.
D) $257,100.
21. Della purchased a warehouse on February 25, 2020, for $450,000. $45,000 of the price was for the land. What is her cost recovery deduction for 2020 rounded to the nearest dollar?
A) $14,319.
B) $6,853.
C) $9,100.
D) $12,887.
E) None of the above.
22. Byron took a business trip from Philadelphia to San Diego. He was away 9 days of which he spent 5 days on business (includes his two travel days) and 4 days vacationing. His expenses are as follows:
Airfare
$
1,100
Lodging (9 days $140)
1,260
Meals (9 days $115)
1,035
Byron’s total travel (including meals and lodging) expense deduction rounded to the nearest dollar is:
A) $2,088.
B) $2,878.
C) $3,395.
D) $1,100.
23. Cole purchased a car for business and personal use. In 2020, he used the car 60% for business (15,000 total miles for the year of which 60% were business) and used the standard mileage rate to calculate his vehicle expenses. He also paid $1,500 in interest and $360 in county property tax on the car. What is the total business deduction related to business use of the car rounded to the nearest dollar?
A) $1,860.
B) $5,175.
C) $9,741.
D) $6,291.
24. Chris runs a business out of her home. She uses 600 square feet of her home exclusively for the business. Her home is 2400 square feet in total. Chris had $36,000 of business revenue and $32,000 of business expenses from her home business. The following expenses relate to her home:
Mortgage interest
$
12,400
Real estate taxes
1,800
Repairs
3,200
Utilities
2,600
Insurance
650
Depreciation (on business use portion of home)
1,750
What is Chris’ net income from her business and the amount of expenses carried over to the following year, if any?
Net Income
Carryover
a.
$
0
$
2,913
b.
$
0
$
0
c.
$
4,000
$
4,130
d.
$
36,000
$
0
25. For the year ended December 31, 2020, David, a married taxpayer filing a joint return, reported the following:
Investment income from taxable interest
$50,000
Investment expenses (advisor)
$ 5,000
Interest expense on funds borrowed in 2020 to purchase investment property
$50,000
What is the maximum amount that David can deduct in 2020 as investment interest expense?
a.
$50,000
b.
$30,000
c.
$45,000
d.
$25,000
e.
None of the above
26. (3 pts) On April 23, 2020, Bailey purchased a luxury automobile (under 6,000 lbs) for $32,000. The car is used 80% for business and 20% for personal use. What is the cost recovery deduction for 2020 assuming the 100% bonus was taken?
27. (4 pts):
The Johnsons had AGI in 2020 of $110,000 and they had the following charitable contributions: SHOW ALL WORK
Cash:
Church $24,000
Red Cross 1,500
United Way 3,500
Long-term Property:
Church
FMV 34,000
Cost 13,000
Determine the allowable charitable deduction for 2020.
28: (3 pts)
Phil attended UW-Stout from 2007 until 2017 (Business major who didnt attend Tax or Finance enough) and took loans to finance his education. In 2020 he had interest from these student loans of $3,100 and they had AGI of $156,000. How much of the interest is deductible in 2020 assuming he is married filing jointly and extremely lucky his wife has a good job?
