Question

1.) What medical expenses are deductible?

-travel expenses

2.) What qualifies as an itemized deduction

-allowable taxes

-allowable charitable contributions

-allowable casualty and loss deductions

3.) What are the rules for the kiddie tax?

4.) who is allowed to deduct FICA taxes

5.) What qualifies as a marriage penalty?

6.)calculate the net investment tax liability

7.) What is the difference between a working taxpayer and an independent contractor?

8.) What does “ordinary and necessary” mean in the context of business expenses?

9.) do sole proprietorship use the same tax year as the proprietor of the business?

10.) What counts as a deductible business expense?

11.) how do partnerships become legally formed ?

12.) on April 18,20X8, Sam sold his 35 percent partnership interest in harken, LCC to Sam for $120,000. Prior to selling his interest, sam had a basis in harken of $80,000. Sam’s basis included $5,000 of recourse debt and $15,000 of non recourse debt that had been allocated to him. Immediately after the purchase, What is Sam’s tax basis in harken ??

Answer 1

1. Medical expenses—Travel Expenses are deductible :

The various medical expenses that are deductible as follows:

1. Preventive care treatments
2. Various surgeries and operations
3. Appointment visits to psychologists and psychiatrists.
4. Various medications prescribed
5. Appliances like false teeth, glasses, hearing aids etc
6. Travel expenses undergone to reach for the medical care or help which could take the shape of your expenses on car travel , travel by bus , parking charges paid ton park the vehicle used in travelling upto the place of medical care.

2. Solution: The correct option is the 2^nd option i.e allowable charitable contributions

1. Only if the charitable contributions made are itemized , it is possible to get a tax deduction, otherwise it is not allowed.
2. These charitable contributions are deductible if proper proof is maintained that these charitable contributions have been made.

The rule for deducting charitable contributions that are itemized are that the combined itemized expenses for the relevant year should be higher than the standard deduction.

3. Rules for Kiddie Tax:

1. The kiddie tax is a tax that is imposed on individuals who are children i.e individuals under the age of 19 years(applicable as of year 2018) and individuals between the age group of 19 and 23 who are full time students and also not independent.
2. The kiddie tax is a tax levied on the unearned portion (i.e income earned in the form of dividends , interest , gifts received , inheritance etc) of the child’s income which is in excess of $ 2100. If the childern’s income only comprises of the income that the child has earned from a job or through self employment, then that means that that the child is exempt from the levy of the kiddie tax on him.
3. The unearned income in excess of $2100 is taxed in the following manner:

Suppose the Total Unearned income = X $

The tax is levied as follows:

1. On the first $ 2100 out of the X $ there is no tax as it is completely exempt
2. On the next $ 2250 out of the (X -2100)$ the tax is levied at the rate of 10%
3. On the next $ 6600 out of the (X -2100)$ the tax is levied at the rate of 24%
4. On the next $ 3350 out of the (X -2100)$ the tax is levied at the rate of 35%
5. On the Balance of $ (X-2100-2250-6600-3350) the tax is levied at the rate of 37%

4.. 1)FICA Taxes are deductible from the Employee’s Paycheck.

2)These taxes are focused on the employer and the the employee in order to fund the United State’s social security and their medicare programs.

3)It is a mandatory payroll deduction. Employers must withhold these taxes fThese are applicable for employed and self employed people. In the case of self employed people these can deduct the employer equivalent portion of the self employment tax will working out the Adjusted Gross Income.

4) FICA taxes are not deductible in the income tax return but the employer portion of the FICA tax is paid with the pre tax income and therefore doesnt have an effect of increasing the taxable income.