Problem 1: Marc Clay was unemployed for all of year 1. In January of year 2, Clay obtained full-time employment 60 miles away from the city where he had resided during the 10 years preceding year 2. Clay kept his new job for all of year 2. In January of year 2, Clay paid directly moving expenses of $3,000 in relocating to his new city of residence, but he received no reimbursement for these expenses. In his year 2 income tax return, Clay's direct moving expenses are
A. Not deductible
B. Fully deductible only if Clay itemizes deductions
C. Fully deductible from gross income in arriving at adjusted gross income
D. Deductible subject to a 2% threshold if Clay itemizes his deductions
Problem 2: George Burke, a salaried taxpayer, paid the following taxes which were not incurred in connection with a trade or business during the current year:
Federal income tax (withheld by employer): $1,500
State income tax (withheld by employer): $1,000
FICA tax (withheld by employer): $700
State sales tax: $900
Federal auto gasoline taxes: $200
What taxes are allowable deductions from Burke's adjusted gross income for the year?
A. $2,800
B. $2,500
C. $1,900
D. $1,000
Problem 3: Allen purchased a personal residence for $86,000. It had a fair market value of $100,000 when it was damaged by a fire. The fair market value after the fire was $60,000 and insurance proceeds totaled $25,000. What is the net amount of casualty loss he can claim if his adjusted gross income is $35,000?
A. $8,500
B. $11,400
C. $15,000
D. $23,000
E. $25,000