Question

Tanesha, aged 66, is single. She has the following income and expenses in 2017:

Net income from sole proprietorship business $43,000 Interest income 1,200 Alimony received 10,000 Loss on sale of investments 1,100 Medical insurance premiums paid (for self-employed taxpayer) 3,000 Property tax on residence 850 Charitable contributions 1,350 Medical expenses 2,000 One-half of the self-employment tax paid 2,600 State income tax 1,900 Federal income tax $6,700

The personal exemption for 2017 is $4,050.

a. Classify the following expenses as either "Deductible for AGI", "Deductible from AGI", or "Not deductible".

Loss on sale of investments Medical insurance premiums paid Property tax on residence Charitable contributions Medical expenses One-half of the self-employment tax paid State income tax Federal income tax

In your computations, when required, round all amounts to the nearest dollar.

b.   Tanesha's gross income is $–––––––, and her AGI is $––––––.

c.   Compute the amount of her total itemized deductions (after any limitations): $––––––––

Answer 1

(a)
Loss on sale of investments	Deductible for AGI
Medical insurance premiums paid	Deductible for AGI
Property tax on residence	Deductible from AGI
Charitable contributions	Deductible from AGI
Medical expenses	Deductible from AGI to the extent it exceeds from 10% of AGI
One-half of the self-employment tax paid	Deductible for AGI
State income tax	Deductible from AGI
Federal income tax	Non Deductible
(b) Computation og Gross income and Adjusted Gross income.
Net income from sole proprietorship business	$43,000
Add: Interest Income	$1,200
Add: Alamony Received	$10,000
Gross Income(i)	$54,200
Less: Deductible for AGI
Loss on sale of investments	$1,100
Medical insurance premiums paid	$3,000
One-half of the self-employment tax paid	$2,600
Deductible for AGI (ii)	$6,700
Adjusted Gross Income (i)-(ii)	$47500
(c)
Amount of itemised deduction
Property tax on residence
Charitable contributions	50% of AGI or Actal contribution whichever is less
Medical expenses	=Medical Expense - 10% f AGI
State income tax
Total Amount of itemised deduction
Note-
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