Question

QUESTION 41

1. 41.-45. George is single and age 56, has AGI of $265,000, and incurs the following expenditures in this year.

   Medical expenses (before 7.5% floor)	$27,000
   Interest on home mortgage	15,500
   State income tax	7,500
   State sales tax	4,500
   Real estate tax	8,600
   Charitable contribution	6,500

   41. What is the amount of George’s medical deduction?

   	a.	$27,000
   	b.	$7,125
   	c.	$500
   	d.	$0
   	e.	None of the above.

2 points   

QUESTION 42

1. Interest on the home mortgage is deductible

   	a.	if the residence is a principal personal residence
   	b.	if the residence is one other residence in addition to the principal personal residence
   	c.	on up to 750,000 of acquisition indebtedness incurred after 12/15/17 and before 1/1/26
   	d.	not on an equity loan borrowed out of the principal personal residence as long as there is equity
   	e.	All of the above.

2 points   

QUESTION 43

1. Given the facts of this example, George would deduct among the taxes

   	a.	state income tax
   	b.	state sales tax
   	c.	real estate tax
   	d.	a. & c.
   	e.	All of the above.

2 points   

QUESTION 44

1. The charitable contribution, on these facts, is

   	a.	deductible
   	b.	not deductible
   	c.	only deductible at 50 percent
   	d.	only deductible at 30 percent
   	e.	None of the above.

2 points   

QUESTION 45

1. The overall phaseout of itemized deductions

   	a.	was repealed by the TCJA of 2017
   	b.	applies in this example
   	c.	it is impossible to determine from the facts given whether or not the overall phaseout of itemized deductions applies
   	d.	All of the above.
   	e.	None of the above.

Answer 1

41)

Option b - $7,125

Medical expenses in excess of 7.5% of AGI are deductible.

27,000 - 7.5%(265,000) = $7,125

Note : Taken as after change in law, prior to change it would have been $500. As the % is 10% instead of 7.5%

42)

Option e

All the options are correct

43)

Option d - Both State income tax & Real estate tax

Tax payer can claim itemized deduction of either State Income tax or State sales tax, they cannot claim both. In the given question, as the state income tax is high, we wish to utilise that and take deduction of State income tax along with real estate tax

44)

Option c - Only 50% deductible

As we do not have the details of the type of contribution made, we assume that the contribution falls under general rule and hence 50% deductible, if not falling under general rule only 30% will be deductible.

45)

Option a - Was repealed by TCJA 2017

The phaseout of itemized deductions has been suspended by the TCJA of 2017

(Assumed that this question belongs to the year after TCJA came into force. If the question belongs to year before TCJA came into force, then we do not have the year to find out the phaseout limit)