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Exam 10: Income, Deductions, and Credits

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Question 41

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During 2016, Hugh, a self-employed individual, paid the following amounts: ​ What is the maximum amount Hugh can claim as taxes in itemizing deductions from AGI?

A) $6,600
B) $6,650
C) $7,850
D) $8,625
E) None of the above

F) A) and D)
G) None of the above

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Question 42

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Marilyn, age 38, is employed as an architect. For calendar year 2016, she had AGI of $204,000 and paid the following medical expenses: ​ Peter and Esther would qualify as Marilyn's dependents except that they file a joint return. Marilyn's medical insurance policy does not cover them. Marilyn filed a claim for reimbursement of $6,000 of her own expenses with her insurance company in December 2016 and received the reimbursement in January 2017. What is Marilyn's maximum allowable medical expense deduction for 2016?

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Marilyn's medical expense deduction is $...

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Question 43

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The child tax credit is based on the number of the taxpayer's qualifying children under age 17.

In December 2016, Emily, a cash basis taxpayer, received a $2,500 cash scholarship for the Spring semester of 2017. However, she did not use the funds to pay the tuition until January 2017. Emily can exclude the $2,500 from her gross income in 2016.

Travis and Andrea were divorced. Their only marital property consisted of a personal residence (fair market value of $400,000, cost of $200,000) , and publicly-traded stocks (fair market value of $800,000, cost basis of $500,000) . Under the terms of the divorce agreement, Andrea received the personal residence and Travis received the stocks. In addition, Andrea was to receive $50,000 for eight years. I.​ If the $50,000 annual payments are to be made to Andrea or her estate (if she dies before the end of the eight years) , the payments will qualify as alimony. II.​ Andrea has a taxable gain from an exchange of her one-half interest in the stocks for Travis' one-half interest in the house and cash. III.If Travis sells the stocks for $900,000, he must recognize a $400,000 gain.

The education tax credits (i.e., the American Opportunity credit and the lifetime learning credit) are available to help defray the cost of higher education regardless of the income level of the taxpayer.

In 2015, Juan and Juanita incur $9,800 in legal and adoption fees directly related to the adoption of an infant son born in a nearby state. Over the next year, they incur another $4,500 of adoption expenses. The adoption becomes final in 2016. Which of the following choices properly reflects the amounts and years in which the adoption expenses credit is available. 2015 2016

Under the terms of a divorce agreement, Ron is to pay his former wife Jill $10,000 per month. The payments are to be reduced to $7,000 per month when their 15 year-old child reaches age 18. During the current year, Ron paid $120,000 under the agreement. Assuming all of the other conditions for alimony are satisfied, Ron can deduct from gross income (and Jill must include in gross income) as alimony:

Brian, a self-employed individual, pays state income tax payments of: $900 on January 15, 2016 (4th estimated tax payment for 2015) $1,000 on April 15, 2016 (1st estimated tax payment in 2016) $1,000 on June 15, 2016 (2nd estimated tax payment in 2016) $1,000 on September 15, 2016 (3rd estimated tax payment in 2016) $800 on January 17, 2017 (4th estimated tax payment of 2016) Brian had a tax overpayment of $500 on his 2015 state income tax return and applied this to his 2016 state income taxes. What is the amount of Brian's state income tax itemized deduction for his 2016 Federal income tax return?

A taxpayer may qualify for the credit for child and dependent care expenses if the taxpayer's dependent is under age 17.

Brad, who would otherwise qualify as Faye's dependent, had gross income of $9,000 during the year. Faye, who had AGI of $120,000, paid the following medical expenses in 2016: ​ Assuming Faye is age 45, she has a medical expense deduction of:

Contributions to public charities in excess of 50% of AGI may be carried back 3 years or forward for up to 5 years.

An individual generally may claim a credit for adoption expenses in the year in which the expenses are paid.

Ronaldo contributed stock worth $12,000 to the Children's Protective Agency, a qualified charity. He acquired the stock 20 months ago for $7,000. He may deduct $7,000 as a charitable contribution deduction (subject to percentage limitations).

Both education tax credits are available for qualified tuition expenses, and in certain instances, also may be available for room and board.

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?

In January 2017, Pam, a calendar year cash basis taxpayer, made an estimated state income tax payment for 2016. The payment is deductible in 2016.

Kevin and Sue have two children, ages 8 and 14. They spend $6,200 per year on eligible employment related expenses for the care of their children after school. Kevin earned a salary of $20,000 and Sue earned a salary of $18,000. What is the amount of the credit for child and dependent care expenses?

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.

George and Erin are divorced, and George is required to pay Erin $20,000 of alimony each year. George earns $75,000 a year. Erin is required to include the alimony payments in gross income although George earned the income.