Federal Taxation Chapter 5 Exam Bank Solution Manual ( Graded A+)

Federal Taxation Chapter 5 Exam Bank Solution Manual ( Graded A+) Itemized deductions are taken when - the taxpayer wants to - they are less than the standard deduction - they are higher than the standard deduction - the standard deduction is limited by high AGI - Answers they are higher than the standard deduction The majority of itemized deductions are - business expenses - tax credits - personal living expenses - none of the above - Answers personal living expenses Generally, a taxpayer may deduct the cost of medical expenses for which of the following? - marriage counseling - health club dues - doctor-prescribed birth control - trips for general health improvement - Answers doctor-prescribed birth control The threshold amount for the deductibility of allowable medical expenses ordinarily is: - 7.5% of AGI - 10% of AGI - 10% of taxable income - 15% of taxable income - Answers 7.5% of AGI During 2018, Raul incurred and paid the following expenses: Prescription drugs- $470 Vitamins/ over the counter - 130 Doctor and dentist visits- 700 Health club fee - 250 Hair transplant surgery - 2,400 What is the total amount of medical expenses (before considering the limitation based on AGI) that would enter into calculation of itemized deductions for Raul's 2018 income tax return? - $1,170 - 1,300 - 1,550 - 3,950 - Answers $1,170 Prescription drugs obtained from sources outside the United States, such as Canada, are - always deductible no matter how they were obtained - deductible only for citizens of canada living in the US - Deductible if prescribed by a physician and approved by the FDA for legal importation - never deductible - Answers Deductible if prescribed by a physician and approved by the FDA for legal importation For 2018 Perla who is single and 55 years of age had AGI of $60,000. During the year, she incurred and paid the following medical costs Doctor&dentist fees $3,350 Prescription med 625 Med care insurance premium 380 Long term care ins. premium 1,600 Hearing aid 150 What amount can Perla take as a medical expense deduction (after AGI limitation) for her 2018 tax return? - $6,065 - 4,500 - 1,565 - 35 - Answers 1,565 Which of the following statements is not true? - A taxpayer can deduct medical expenses incurred for members of his family who are dependents - The AGI threshold for deductible medical expenses is 7.5% - Deductible medical expenses include long-term care services for disable spouses and dependents - All of the choices are false - Answers All of the choices are false For 2018, the amount of sales tax deduction is calculated by - Determining the actual sales tax paid during the year - Using the IRS sales tax deduction calculator - Using the sales worksheet and tax tables provided by the IRS in the Schedule A instructions - All of the above - Answers - All of the above Daryl, who had significant itemized deductions for 2018 and therefore was eligible to use Schedule A purchased a new vehicle in 2018 for $40,000 with a state sales tax of 10%. The allocated deductoin amount for other purchases made by Daryl throughout the year, using the IRS state and local sales tax tables, would be $750. He also paid state income taxes of $4,500 for 2018. Daryl's best option to legally maximize his tax savings in 2018, assuming he was under the $10,000 limit for state and local taxes would be to: - Deduct the amount of state sales tax for the vehicle purchase on Schedule A - take the standard deduction - take the deduction for the state income taxes paid on Schedule A - Deduct his total amount of allowable state sales tax deduction on Schedule A - Answers Deduct his total amount of allowable state sales tax deduction on Schedule A During 2018, Noriko paid the following taxes related to her home: Real estate property - $1,800