Individual Taxation Paper 12


Alex and Myra Burg, married and filing joint income tax returns, derive their entire income from the operation of their retail candy shop. Their 2012 adjusted gross income was $50,000. The Burgs itemized their deductions on Schedule A for 2012. The following unreimbursed cash expenditures were among those made by the Burgs during 2012:
State income tax $1,200
Self-employment tax 7,650
What amount should the Burgs deduct for taxes in their itemized deductions on Schedule A for 2012?


The 2013 deduction by an individual taxpayer for interest on investment indebtedness is


The Browns borrowed $20,000, secured by their home, to purchase a new automobile. At the time of the loan, the fair market value of their home was $400,000, and it was unencumbered by other debt. The interest on the loan qualifies as


On January 2, 2008, the Philips paid $50,000 cash and obtained a $200,000 mortgage to purchase a home. In 2012 they borrowed $15,000 secured by their home, and used the cash to add a new room to their residence. That same year they took out a $5,000 auto loan.
The following information pertains to interest paid in 2012:
Mortgage interest $17,000
Interest on room construction loan 1,500
Auto loan interest 500
For 2012, how much interest is deductible, prior to any itemized deduction limitations?


Jackson owns two residences. The second residence, which has never been used for rental purposes, is the only residence that is subject to a mortgage. The following expenses were incurred for the second residence in 2012:
Mortgage interest $5,000
Utilities 1,200
Insurance 6,000
For regular income tax purposes, what is the maximum amount allowable as a deduction for Jackson’s second residence in 2012?


Robert and Judy Parker made the following payments during 2012:
Interest on a life insurance policy loan (the loan proceeds were used for personal use) $1,200
Interest on home mortgage for period January 1 to October 4, 2012 3,600
Penalty payment for prepayment of home mortgage on October 4, 2012 900
How much can the Parkers utilize as interest expense in calculating itemized deductions for 2012?


During 2013, William Clark was assessed a deficiency on his 2011 federal income tax return. As a result of this assessment he was required to pay $1,120 determined as follows:
Additional tax $900
Late filing penalty 60
Negligence penalty 90
Interest 70
What portion of the $1,120 would qualify as itemized deductions for 2013?


Smith, a single individual, made the following charitable contributions during the current year. Smith’s adjusted gross income is $60,000.
Donation to Smith’s church $5,000
Artwork donated to the local art museum. Smith purchased it for $2,000 four months ago. A local art dealer appraised it for 3,000
Contribution to a needy family 1,000
What amount should Smith deduct as a charitable contribution?


Stein, an unmarried taxpayer, had adjusted gross income of $80,000 for the year and qualified to itemize deductions. Stein had no charitable contribution carryovers and only made one contribution during the year. Stein donated stock, purchased seven years earlier for $17,000, to a tax-exempt educational organization. The stock was valued at $25,000 when it was contributed. What is the amount of charitable contributions deductible on Stein’s current year income tax return?


Moore, a single taxpayer, had $50,000 in adjusted gross income for 2012. During 2012 she contributed $18,000 to her church. She had a $10,000 charitable contribution carryover from her 2011 church contributions. What was the maximum amount of properly substantiated charitable contributions that Moore could claim as an itemized deduction for 2012?


Total Questions:
Correct Answers:
Wrong Answers: