H3
smai2008.xlsx
PR 8-1
During the current year, Angela sustains serious injuries from a snow skiing accident. She incurs the following expenses: | |
Solution | |
Item | Amount |
Doctor bills | $ 11,700 |
Hospital bills | 9,400 |
Legal fees in suit against ski resort | 3,000 |
Angela is single and has no dependents. During the current year, her salary is $58,000. She pays $600 in medical and dental insurance premiums, $2,750 in mortgage interest on her home, and $1,200 in interest on her car. Her health insurance provider reimburses her for $10,000 of the medical expenses. What is her current year taxable income? | |
Required: | |
What is her current year taxable income? Show all calculations. | |
PR 8-2
Dawn, a single, cash method taxpayer, paid the following in the current year: | |
Item | Amount |
Federal income tax (employer withheld) | $ 5,400 |
State income tax (employer withheld) | 2,000 |
FICA (employer withheld) | 3,800 |
Sales tax on a new car | 600 |
License for new car | 70 |
Dawn's new car has a FMV of $20,000 and it weighs 3,000 pounds. The county also assessed a property tax on the car. The tax was 2% of its FMV and $10 per hundred weight. The car is used 100% of the time for personal purposes. Dawn sold her house in the current tax year on April 15th. The county's property tax on the home for the tax year was $1,850, payable on February 1st of the following year. The county's property tax year is the calendar year. Dawn's AGI for the current tax year is $50,000 and her other itemized deductions exclusive of taxes are $4,000. | |
Required: | Solution |
a. What is Dawn's deduction for taxes in 2013? | |
Note: Show all calculations. | |
b. Where on Dawn's tax return should she report her deduction for taxes? | |
PR 8-3
Several years ago, Magdelena purchased a new residence for $300,000. Currently, the outstanding mortgage on the residence is $260,000. The current fair value of the home is $330,000. Magdelena wants to borrow a sizable sum of money to pay for the college education costs of her two children and believes the interest would be deductible if she takes out a home equity loan. |
Required: |
For each of the independent situations below, determine the amount of the loan on which Magdelena may deduct the interest as qualified residence interest. |
Solution |
a. Magdelena borrows $50,000 as a home equity loan. |
b. Magdelena borrows $80,000 as a home equity loan. |
c. Alternatively, assume the current fair market value of her home is $410,000 and she borrows $110,000 as a home equity loan. |
d. Alternatively, assume the current outstanding balance of the mortgage Magdelena incurred to purchase the home is $1,200,000, the home's fair market value is $1,400,000, and she borrows $80,000 as a home equity loan. |
PR 8-4
During the current year, Doug incurs the following deductible expenses: | |
Item | Amount |
State income taxes | $ 2,300 |
Local property taxes | 3,000 |
Medical expenses | 800 |
Charitable contributions | 2,000 |
Doug is single, has no dependents, and has $35,000 of AGI for the year. | |
Required: | Solution |
What is the amount of Doug's taxable income? | |
PR 8-5
Donna is an attorney who renders volunteer legal services to a Legal Aid Society, which provides legal advice to low-income individuals. The Legal Aid Society is a qualified charitable organization. During the current year she spends a total of 200 hours in this volunteer work. Her regular billing rate is $150 per hour. In addition, she spends a total of $800 in out-of-pocket costs in providing these services. She receives no compensation and is not reimbursed for her out-of-pocket costs. | |
Required: | Solution |
What is Donna's charitable contribution for the year because of these activities. | |
PR 8-6
In each of the following independent cases, determine the amount of the charitable contribution and the limitation that would apply. In each case, assume that the donee is a qualified public charity. |
Solution |
a. Sharon donates a tract of land to a charitable organization. She has held the land for seven years. Her basis in the land is $10,000 and its FMV is $40,000. |
b. Assume the same facts in Part A, except that Sharon has held the land for only 11 months and the FMV is $23,000. |
c. Jack purchases a historical document for $50,000. He donates the historical document to a charitable organization two years later. The organization plans to use of for research and study. Its FMV at the time of the donation is $100,000. |
d. Assume the same facts as in Part c, except that the organization plans to sell the document and put the money into an endowment fund. |
e. Valerie donates some inventory to a charitable organization. The inventory is not food or clothing. The inventory is purchased for $500 and its FMV is $1,200 at the time of the donation. She held the inventory for seven months. |
PR 8-7
Bonnie's charitable contributions and AGI for the past four years were as follows: | ||||
Solution | ||||
2010 | 2011 | 2012 | 2013 | |
AGI | $ 50,000 | $ 55,000 | $ 58,000 | $ 60,000 |
Contributions subject to the | ||||
50% limitation | 40,000 | 29,000 | 25,000 | 10,000 |
Required: | ||||
What is the amount of the charitable deduction for each year and the order in which the deduction and carryovers are used. | ||||