Enrolled Agent - Exam 1 with Verified
Solutions| Latest Update
John has a heart ailment. On his doctor's advice, he installed an elevator in his home so that he
would not have to climb stairs. The cost of the elevator was $7,000. An appraisal shows that the
elevator increased the value of his home by $5,000. John can claim a medical deduction of
Correct Ans-$2,000
Ilene made the following cash contributions to qualifying organizations for the year:
Veterans of All Wars - $16,000
University of Nevada Las Vegas - $10,000
Hospital for Children - $14,000
Ilene's AGI for the year was $30,000. What is her allowable contribution deduction? Correct
Ans-$30K
Two things to consider, the type of the organization and the type of contribution. the types of
organization all qualify for 100%. Any excess in contributions may carry forward.
Keith and Margaret had adjusted gross income of $100,000. They had real estate taxes of $4,000,
mortgage interest of $12,000, home equity loan interest of $6,000 used to substantially improve
the residence, automobile loan interest of $3,000, second home mortgage interest of $4,000, and
credit card interest of $2,000. The total allowable interest deduction is Correct Ans-$22,000
General rule is no personal interest may be deducted.
,The mortgage interests and equity loan interest.
Investment interest generally includes Correct Ans-Interest expense to acquire stocks and
bonds.
Insurance premiums for which of the following policies qualify as a medical expense? (Contact
lens) Correct Ans-Deductions are allowed for premiums made for contact lens insurance and
membership in associates that give cooperative medical service.
During the current year, John donated $100 to the United Way, $200 to Veterans of Foreign Wars,
and $300 to his neighbor whose home was destroyed by a tornado. How much is John's
deduction for charitable contributions? Correct Ans-$300
Jeremy decided to itemize on his Year 1 return. He has the following receipts:
State income tax, $3,000
Federal income tax, $12,000
County real estate tax, $2,000
Fee for inspection of car that he uses only personally, $50
Homeowners' association fees on his personal home, $500
Self-employment tax of $1,000
Compute the amount of tax deductions he can take on his Schedule A, Itemized Deductions.
Correct Ans-State and local real estate property are deductible only here = $5,000
,To deduct a personal property tax on schedule A, Correct Ans-the tax imposed must be
determined solely on the value of the property.
Transfer taxes are not deductible.
Medical Deduction Correct Ans-Amounts paid for qualified medical expenses that exceed
7.5% of AGI may be deducted.
- Diagnosis, cure, mitigation, treatment
- Medical insurance
- Qualified long-term care premiums and services
- Smoking cessation programs and prescribed drugs designed to alleviate nicotine withdrawal
- Transportation primarily for and essential to medical care
- AC
- Dehumidifying equipment
- Medicare Part B
Real Property - Tax Deductions Correct Ans-- State and local real property taxes are
deductible (Federal are not)
- Taxes paid to a financial institution and held in escrow
All of the following taxes are deductible on Schedule A (Form 1040) EXCEPT
, a. State or local inheritance tax
b. State income tax.
c. State real estate tax on a personal residence.
d. Foreign income tax. Correct Ans-a. State or local inheritance tax
During the current year, Ms. Gonzales paid $2,000 for local real estate taxes on property she
rents to others and $3,425 real estate taxes on her residence. In addition, she paid gift taxes of
$650 and $1,250 for state income taxes to New Jersey. What amount can Ms. Gonzales deduct as
an itemized deduction on her tax return for the current year? Correct Ans-. The local real
estate taxes on the personal residence ($3,425) and the state income taxes ($1,250) are deductible
as itemized deductions for a total of $4,675. The real estate taxes on the rental property may be
deductible, but not as an itemized deduction. Gift taxes are not deductible (Publication 17).
Personal interest does not include Correct Ans-Interest on trade or business debt
Investment interest
Passive activity interest
Qualified residence interest
Interest on the unpaid portion of certain estate taxes
Student loan interest
Points paid by the borrower with respect to a home mortgage are prepaid interest Correct
Ans-which is typically deductible over the term of the loan
Which of the following would disqualify points from being fully deductible in the year paid?
Solutions| Latest Update
John has a heart ailment. On his doctor's advice, he installed an elevator in his home so that he
would not have to climb stairs. The cost of the elevator was $7,000. An appraisal shows that the
elevator increased the value of his home by $5,000. John can claim a medical deduction of
Correct Ans-$2,000
Ilene made the following cash contributions to qualifying organizations for the year:
Veterans of All Wars - $16,000
University of Nevada Las Vegas - $10,000
Hospital for Children - $14,000
Ilene's AGI for the year was $30,000. What is her allowable contribution deduction? Correct
Ans-$30K
Two things to consider, the type of the organization and the type of contribution. the types of
organization all qualify for 100%. Any excess in contributions may carry forward.
Keith and Margaret had adjusted gross income of $100,000. They had real estate taxes of $4,000,
mortgage interest of $12,000, home equity loan interest of $6,000 used to substantially improve
the residence, automobile loan interest of $3,000, second home mortgage interest of $4,000, and
credit card interest of $2,000. The total allowable interest deduction is Correct Ans-$22,000
General rule is no personal interest may be deducted.
,The mortgage interests and equity loan interest.
Investment interest generally includes Correct Ans-Interest expense to acquire stocks and
bonds.
Insurance premiums for which of the following policies qualify as a medical expense? (Contact
lens) Correct Ans-Deductions are allowed for premiums made for contact lens insurance and
membership in associates that give cooperative medical service.
During the current year, John donated $100 to the United Way, $200 to Veterans of Foreign Wars,
and $300 to his neighbor whose home was destroyed by a tornado. How much is John's
deduction for charitable contributions? Correct Ans-$300
Jeremy decided to itemize on his Year 1 return. He has the following receipts:
State income tax, $3,000
Federal income tax, $12,000
County real estate tax, $2,000
Fee for inspection of car that he uses only personally, $50
Homeowners' association fees on his personal home, $500
Self-employment tax of $1,000
Compute the amount of tax deductions he can take on his Schedule A, Itemized Deductions.
Correct Ans-State and local real estate property are deductible only here = $5,000
,To deduct a personal property tax on schedule A, Correct Ans-the tax imposed must be
determined solely on the value of the property.
Transfer taxes are not deductible.
Medical Deduction Correct Ans-Amounts paid for qualified medical expenses that exceed
7.5% of AGI may be deducted.
- Diagnosis, cure, mitigation, treatment
- Medical insurance
- Qualified long-term care premiums and services
- Smoking cessation programs and prescribed drugs designed to alleviate nicotine withdrawal
- Transportation primarily for and essential to medical care
- AC
- Dehumidifying equipment
- Medicare Part B
Real Property - Tax Deductions Correct Ans-- State and local real property taxes are
deductible (Federal are not)
- Taxes paid to a financial institution and held in escrow
All of the following taxes are deductible on Schedule A (Form 1040) EXCEPT
, a. State or local inheritance tax
b. State income tax.
c. State real estate tax on a personal residence.
d. Foreign income tax. Correct Ans-a. State or local inheritance tax
During the current year, Ms. Gonzales paid $2,000 for local real estate taxes on property she
rents to others and $3,425 real estate taxes on her residence. In addition, she paid gift taxes of
$650 and $1,250 for state income taxes to New Jersey. What amount can Ms. Gonzales deduct as
an itemized deduction on her tax return for the current year? Correct Ans-. The local real
estate taxes on the personal residence ($3,425) and the state income taxes ($1,250) are deductible
as itemized deductions for a total of $4,675. The real estate taxes on the rental property may be
deductible, but not as an itemized deduction. Gift taxes are not deductible (Publication 17).
Personal interest does not include Correct Ans-Interest on trade or business debt
Investment interest
Passive activity interest
Qualified residence interest
Interest on the unpaid portion of certain estate taxes
Student loan interest
Points paid by the borrower with respect to a home mortgage are prepaid interest Correct
Ans-which is typically deductible over the term of the loan
Which of the following would disqualify points from being fully deductible in the year paid?
