Problem 1
Donna donates stock in Chipper Corporation to the American Red Cross on September 10, 2016. She purchased the stock for $18,100 on December 28, 2015, and it had a fair market value of $27,000 when she made the donation.
a. The stock is treated as capital gain property and Donna's charitable contribution deduction is $ for tax purposes.
b. Assume instead that the stock had a fair market value of $15,000 (rather than $27,000) when it was donated to the American Red Cross. Donna's charitable contribution deduction would be $ for tax purchases.
Problem 2
Paul, age 62, suffers from emphysema and severe allergies and, upon the recommendation of his physician, has a dust elimination system installed in his personal residence. In connection with the system, Paul incurs and pays the following amounts during 2016:
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Doctor and hospital bills
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$2,500
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Dust elimination system
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10,000
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Increase in utility bills due to the system
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450
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Cost of certified appraisal
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300
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In addition, Paul pays $750 for prescribed medicines.
The system has an estimated useful life of 20 years. The appraisal was to determine the value of Paul's residence with and without the system. The appraisal states that his residence was worth $350,000 before the system was installed and $356,000 after the installation. Paul's AGI for the year was $50,000.
a. What is the total of Paul's qualifying medical expenses for 2016?
b. What is his medical expense deduction for 2016?
Problem 3
Alicia sold her personal residence to Rick on June 30 for $300,000. Before the sale, Alicia paid the real estate tax of $4,380 for the calendar year. For income tax purposes, the deduction is apportioned as follows: $2,160 to Alicia and $2,220 to Rick.
What is Rick's basis in the residence?
Problem 4
Malcolm owns 60% and Buddy owns 40% of Magpie Corporation. On July 1, 2016, each lends the corporation $30,000 at an annual interest rate of 10%. Malcolm and Buddy are not related. Both shareholders are on the cash method of accounting, and Magpie Corporation is on the accrual method. All parties use the calendar year for tax purposes. On June 30, 2017, Magpie repays the loans of $60,000 together with the specified interest of $6,000.
a. How much of the interest can Magpie Corporation deduct in 2016? In 2017?
Magpie Corporation can deduct interest expense of $ in 2016.
Magpie Corporation can deduct interest expense of $ in 2017.
b. When is the interest included in Malcolm and Buddy's gross income?
Problem 5
On December 27, 2016, Roberta purchased four tickets to a charity ball sponsored by the city of San Diego for the benefit of underprivileged children. Each ticket cost $200 and had a fair market value of $35. On the same day as the purchase, Roberta gave the tickets to the minister of her church for personal use by his family. At the time of the gift of the tickets, Roberta pledged $4,000 to the building fund of her church. The pledge was satisfied by a check dated December 31, 2016, but not mailed until January 3, 2017.
If an amount is zero, enter "0".
a. Presuming Roberta is a cash basis and calendar year taxpayer, she can deduct $ for the tickets and $ for the pledge as a charitable contribution for 2016.
b. Would the amount of the deduction be any different if Roberta were an accrual basis taxpayer?
Problem 6
For calendar year 2016, Stuart and Pamela Gibson file a joint return reflecting AGI of $350,000. Their itemized deductions are as follows. Note: All expenses are before any applicable limitations, unless otherwise noted.
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Casualty loss after $100 floor (not covered by insurance)
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$48,600
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Home mortgage interest
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19,000
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Credit card interest
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800
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Property taxes on home
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16,300
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Charitable contributions
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28,700
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State income tax
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18,000
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Tax return preparation fees
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1,200
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Round your intermediate computations to nearest whole dollar.
The Gibson's total itemized deductions before any phaseout are $.
The Gibson's total itemized deduction is $.