A taxpayer”s car is stolen. The taxpayer paid $22,000 for the car; it was worth $12,000 at the time it was stolen. Insurance paid her $11,000. Her adjusted gross income for the year of the theft is $45,000. What is the amount of the taxpayer”s deductible theft loss? a. Correct. The amount of the taxpayer”s loss is $1,000 (the lesser of $22,000 adjusted basis or […]

Which of the following is not a deductible medical expense? a. Incorrect. Fees to a chiropractor qualify because they are paid to a medical practitioner. b. Correct. The cost of teeth-whitening treatments is not deductible because it is viewed as a cosmetic procedure not required to fix a medical condition. c. Incorrect. The cost of a prescribed smoking cessation program is deductible because it treats […]

Rita, who is 68 years old, pays $3,600 for long-term care insurance in 2012. She is not self-employed. How much of the premiums qualify as a deductible medical expense? a. Incorrect. She is not barred for any reason from treating some of the long-term care premiums as deductible. b. Incorrect. The limit of $1,310 would apply if she were more than 50 years old but […]

Harvey suffers from severe cystic fibrosis. His doctor advised him to install central air conditioning in his home to alleviate his condition by controlling temperature and regulating humidity. It cost him $12,000 and increased the value of his home by $10,000. Assuming the total of his other medical costs already exceed the 7.5% AGI limit, how much of the cost of the air-conditioning installation can […]

On December 31, 2012, a taxpayer pays state income taxes by the following methods. Which one cannot be deducted on a 2012 return? a. Incorrect. Because the taxpayer had sufficient funds to cover the check mailed before the end of the year, it is deductible in the year of mailing even though the check is cashed in the following year. b. Incorrect. Personal delivery is […]

Which of the following is a deductible tax? a. Incorrect. Homeowner”s association fees are not considered a real estate tax, because they are not based on the assessed value of the property or used for the general community or a governmental purpose and so are not deductible. b. Correct. A tenant-shareholder can deduct his or her share of real property taxes paid by a cooperative […]

Which of the following items on which sales tax is paid cannot be added to the amount of the sales tax deduction from the IRS table? a. Correct. Even though jewelry can be a big-ticket item, it is not an enumerated one for purposes of adding sales tax to the amount from the table. b. Incorrect. Sales tax on the purchase of a boat can […]

Which of the following tax payments is deductible? a. Correct. Special assessments to benefit the entire tax district are considered a general real estate tax, the amount of which paid by the homeowner is deductible. b. Incorrect. Special assessments to benefit the taxpayer”s property are not deductible because they are not levied for the general public welfare. c. Incorrect. Special fees or charges, including amounts […]

Which of the following is not a condition for deducting points in the year of payment? a. Correct. There is no AGI limit on deducting points. b. Incorrect. It is true that the proceeds of the loan must be used to buy, build, or substantially improve the taxpayer”s principal residence. c. Incorrect. It is correct that the charging of points must be an established business […]

Which of these organizations is not a qualified organization for charitable contribution purposes? a. Incorrect. An organization that fosters international amateur sports is treated as a qualified organization, even though it involves an international activity. b. Incorrect. A war veterans” post is within the category of organizations that are qualified. c. Correct. Foreign charities, such as a church in Brazil, do not qualify (with the […]