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Taxpayers may elect to deduct state and local sales taxes instead of deducting state and local income taxes.

A) True
B) False

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An individual who is eligible to be claimed as a dependent on another's return and has $1,000 of earned income may claim a standard deduction of $1,350.

A) True
B) False

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Which of the following is a true statement?


A) the deduction of cash contributions to public charities is limited to 30 percent of AGI.
B) the deduction of capital gain property to private nonoperating foundations is limited to 50 percent of AGI.
C) the deduction of capital gain property to public charities is limited to 20 percent of AGI.
D) the deduction of cash contributions to private nonoperating foundations is limited to 30 percent of AGI.
E) None of the above is truE.The deduction of cash contributions to public charities is limited to 50 percent of AGI, the deduction of capital gain property to private nonoperating foundations is limited to 20 percent of AGI, and the deduction of capital gain property to public charities is limited to 30 percent of AGI.

F) All of the above
G) C) and E)

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Frieda is 67 years old and deaf. If Frieda files as a head of household, what amount of standard deduction can she claim in 2016?


A) $10,850.
B) $9,300.
C) $10,400.
D) $12,600.
E) $1,550.

F) B) and E)
G) All of the above

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Constance currently commutes 25 miles from her house to her existing part time job in the suburbs. Next week she begins a new full time job in another state, and this job location is 100 miles from her existing home. Because of the additional distance Constance is selling her house, and she has rented an apartment that is only 2 miles from her new job. Constance expects to pay the following moving expenses. Constance currently commutes 25 miles from her house to her existing part time job in the suburbs. Next week she begins a new full time job in another state, and this job location is 100 miles from her existing home. Because of the additional distance Constance is selling her house, and she has rented an apartment that is only 2 miles from her new job. Constance expects to pay the following moving expenses. Determine if this move qualifies for a moving expense deduction and calculate the amount (if any) of the deduction. Determine if this move qualifies for a moving expense deduction and calculate the amount (if any) of the deduction.

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The move qualifies for a deduction of $8...

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All business expense deductions are claimed as "above the line" deductions.

A) True
B) False

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Which of the following is a miscellaneous itemized deduction that is not subject to the 2 percent of AGI floor?


A) gambling losses to the extent of gambling winnings.
B) fees for investment advice.
C) employee business expenses.
D) tax preparation fees.
E) All of the above are subject to the 2 percent of AGI floor limit.

F) B) and C)
G) A) and D)

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This year Amanda paid $749 in Federal gift taxes on a gratuitous transfer to her nephew. Amanda lives in Texas and does not pay any state or local income taxes. Which of the following is a true statement?


A) Amanda cannot deduct Federal gift taxes.
B) Amanda can deduct Federal gift taxes for AGI.
C) Amanda can deduct Federal gift taxes paid as an itemized deduction.
D) Amanda must include Federal gift taxes with other miscellaneous itemized deductions.
E) None of the above is truE.Federal gift and estate taxes are not deductible.

F) A) and B)
G) A) and E)

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Which of the following costs are deductible as an itemized medical expense?


A) The cost of prescription medicine and over-the-counter drugs.
B) Medical expenses incurred to prevent disease.
C) The cost of elective cosmetic surgery.
D) Medical expenses reimbursed by health insurance.
E) None of the above costs is deductiblE.Medical expenses include any payments for the care, prevention, diagnosis, or cure of injury, disease, or bodily function that are not reimbursed by health insurance.

F) None of the above
G) All of the above

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This year, Benjamin Hassell paid $20,000 of interest on a mortgage on his home (Benjamin borrowed $600,000 to buy the residence and it is currently worth $1,000,000), $12,000 on a $150,000 home equity loan on his home, and $10,000 of interest on a mortgage on his vacation home (loan of $300,000; home purchased for $400,000). How much interest expense can Benjamin deduct as an itemized deduction?

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$38,000.
Explanation: Benjamin's acquisi...

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Rochelle, a single taxpayer (age 47), has an AGI of $275,200. This year, she paid medical expenses of $30,000, state income taxes of $4,000, mortgage interest of $10,600, and charitable contributions of $6,000. What would be the amount of her total itemized deductions she may claim on her tax return?

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Rochelle's itemized deductions for the y...

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Which of the following is a true statement?


A) Expenses associated with a "hobby" are never deductible.
B) The deductibility of an activity's expenses in excess of revenues depends upon whether the activity is primarily profit-motivated or a hobby as determined by facts and circumstances.
C) Taxpayers engaged in a "hobby" are always presumed to be motivated by profit.
D) The regulations do not provide any guidance for determining whether an activity is profit motivated.
E) All of the above are truE.The regulations provide a list of factors for determining whether an activity is profit motivated.The presumption that a hobby is profit motivated depends upon whether the activity generates a profit in three of five consecutive years.

F) C) and D)
G) C) and E)

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Simone donated a landscape painting (tangible capital gain property) to a library, a public charity. She purchased the painting five years ago for $50,000, and on the date of the gift, it had a fair market value of $200,000. What is her maximum charitable contribution deduction for the year if her AGI is $300,000 (before considering the itemized deduction phase-out) ?


A) $100,000.
B) $200,000.
C) $90,000 if the library uses the painting in its charitable purpose.
D) $150,000.
E) None of the abovE.The painting is appreciated capital gain property given to a public charity.However, because it is also tangible personal property the donation is FMV only if it is related to the charitable use or purpose.If so, the deduction is limited to 30% of AGI.If not, the deduction is basis limited to 50% of AGI.

F) A) and E)
G) A) and D)

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Lewis is an unmarried law student at State University, a qualified educational institution. Last year Lewis borrowed $30,000 and used the proceeds to pay his university tuition. This year Lewis paid $1,500 of interest on the loan. Which of the following is a true statement if Lewis reports $40,000 of salary and no other items of income or expense?


A) Lewis can deduct all the interest on his student loan for AGI.
B) Lewis can deduct all the interest on his student loan as an itemized deduction.
C) Lewis can only deduct $1,000 of the interest on his student loan for AGI.
D) Lewis can only deduct $1,000 of the interest on his student loan as an itemized deduction.
E) All of the above are falsE.Up to $2,500 of interest on student loans is deductible for AGI.The interest deduction is phased-out for single taxpayers with AGI exceeding $65,000.

F) A) and B)
G) A) and E)

Correct Answer

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Jill currently lives in the suburbs and commutes 25 miles to her office in downtown Freeport. She is considering quitting her current job to look for new employment in the downtown area. Which of the following statements best describes how Jill can satisfy the distance test for deducting moving expenses if she accepts a new job in downtown Freeport?


A) Jill must move at least 25 miles further away from downtown Freeport.
B) Jill must move 25 miles east from downtown Freeport.
C) Jill must move 50 miles further away from downtown Freeport.
D) Jill need not move her residence because she is starting a new job.
E) Jill cannot satisfy the distance test if she accepts a job in downtown Freeport.

F) B) and E)
G) D) and E)

Correct Answer

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Grace is employed as the manager of a sandwich shop. This year she earned a salary of $45,000 and incurred the following expenses associated with her employment: Grace is employed as the manager of a sandwich shop. This year she earned a salary of $45,000 and incurred the following expenses associated with her employment: What amount of miscellaneous itemized deductions can Grace claim on Schedule A if these are her only miscellaneous itemized deductions? A) $150. B) $1,050. C) $550. D) $200 if Grace was reimbursed $50 for her cooking class. E) None of the abovE.The subscriptions and cooking class ($550) are deductible but this sum is reduced to zero by the 2 percent of AGI limitation ($900) . What amount of miscellaneous itemized deductions can Grace claim on Schedule A if these are her only miscellaneous itemized deductions?


A) $150.
B) $1,050.
C) $550.
D) $200 if Grace was reimbursed $50 for her cooking class.
E) None of the abovE.The subscriptions and cooking class ($550) are deductible but this sum is reduced to zero by the 2 percent of AGI limitation ($900) .

F) A) and C)
G) B) and E)

Correct Answer

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This fall Millie finally repaid her student loan. She originally borrowed the money to pay tuition several years ago when she attended at State University (a qualified educational institution) . This year Millie paid a total of $2,400 of interest on the loan. If Millie files single and reports $70,000 of income and no other items of income or expense how much of the interest can she deduct?


A) Millie can deduct $2,400 for AGI.
B) Millie can deduct $1,600 for AGI.
C) Millie can deduct $2,400 as an itemized deduction.
D) Millie can deduct $800 for AGI.
E) None - the tuition is not deductiblE.Millie may deduct the amount of interest paid ($2,400) reduced by the phase-out amount ($2,400 * [($70,000 - 65,000) /$15,000] = $800) .Thus, Millie may deduct $1,600 ($2,400 - $800 = $1,600) .

F) C) and D)
G) B) and C)

Correct Answer

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Don's personal auto was damaged in a wind storm this year. Don purchased the auto several years ago for $32,000 and it was worth $18,000 at the time of the storm. The damage was superficial, so Don decided not to repair the car. Although Don collected $750 from his insurance company, the value of the car dropped after the storm to $15,000. What is the amount of casualty loss from the storm damage before Don applies any floor limitations?

Correct Answer

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$2,250
Explanation: The loss i...

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The deduction to individual taxpayers for charitable contributions paid in cash made to public charities is limited to ten percent of the taxpayer's AGI whereas casualty losses on personal assets are only deductible to the extent the losses exceed ten percent of the taxpayer's AGI.

A) True
B) False

Correct Answer

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Which of the following is a true statement?


A) For purposes of the deduction for educational interest, expenses do not include expenses for room, board and travel.
B) For purposes of the deduction for educational interest, qualified education expenses are those paid for the education of the taxpayer, the taxpayer's spouse, or a taxpayer's dependent.
C) The maximum deduction for interest expense on qualified education loans is $6,000.
D) A penalty paid for prematurely withdrawing a certificate of deposit or similar deposit is deductible as an investment expense.
E) All of the above are falsE.Penalties for early withdrawal are deductible for AGI.

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

Correct Answer

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