ACC 555 Week 11 Final Exam – Strayer New
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Chapters 7
Through 14
Prentice Hall's Federal Taxation 2015
Comprehensive, 28e
(Pope)
Chapter
7 Itemized Deductions
1) For
individuals, all deductible expenses must be classified as deductions for AGI
or deductions from AGI.
2) In 2014,
medical expenses are deductible as a from AGI deduction to the extent
that they exceed 7.5 percent of the taxpayer's AGI.
3) Medical
expenses paid on behalf of an individual who could be the taxpayer's dependent
except for the gross income or joint return tests are deductible as itemized
deductions.
4) Medical
expenses incurred on behalf of children of divorced parents are deductible by
the parent who pays the expenses but only if that parent also is entitled to
the dependency exemption.
5) The
definition of medical care includes preventative measures such as routine
physical examinations.
6) Due to stress
on the job, taxpayer Charlie began to experience chest pains. In order to relax
and relieve the pains, he and his spouse went on an ocean cruise. The cost of
the cruise to alleviate this medical condition is tax deductible.
7) Expenditures
for a weight reduction program are deductible if recommended by a physician to
treat a specific medical condition such as hypertension caused by excess
weight.
8) In order for
a taxpayer to deduct a medical expense, the amount must be paid to a certified
medical doctor (M.D.).
9) Jeffrey, a
T.V. news anchor, is concerned about the wrinkles around his eyes. Because it
is job-related, the cost of a face lift to eliminate these wrinkles is a
deductible medical expense.
10) Expenditures
for long-term care insurance premiums qualify as a medical expense deduction
subject to an annual limit based upon the age of an individual.
11) Capital
expenditures for medical care which permanently improve or better the
taxpayer's property are deductible to the extent the cost exceeds the increase
in fair market value to the property attributable to the capital expenditure.
12) Expenditures
incurred in removing structural barriers in the home of a physically
handicapped individual are deductible only to the extent the cost exceeds the
increase in fair market value to the property attributable to the capital
expenditure.
13) If the
principal reason for a taxpayer's presence in an institution is the need and
availability of medical care, the entire cost of lodging and meals is
considered qualified medical expenditures.
14) A medical
expense is generally deductible only in the year in which the expense is
actually paid.
15) If a
prepayment is a requirement for the receipt of the medical care, the payment is
deductible in the year paid rather than the year in which the care is rendered.
16) If a medical
expense reimbursement is received in a year after a deduction has been taken on
a previous year's return, the previous year's return must be amended to
eliminate the reimbursed expense.
17) Assessments
or fees imposed for specific privileges or services are not deductible as
taxes.
18) Foreign real
property taxes and foreign income taxes are not deductible as itemized
deductions.
19) A personal
property tax based on the weight of the property is deductible.
20) Assessments
made against real estate for the purpose of funding local improvements are not
deductible in the year paid but rather should be added to the cost basis of the
property.
21)
Self-employed individuals may deduct the full self-employment taxes paid as a for
AGI deduction.
22)
Finance charges on personal credit cards are considered interest and are,
therefore, deductible.
23)
In general, the deductibility of interest depends on the purpose for which the
indebtedness is incurred.
24)
Interest expense incurred in the taxpayer's trade or business is deductible as
a for AGI deduction without limitation if the taxpayer materially
participates in the business.
25)
Investment interest expense which is disallowed because it exceeds the
taxpayer's net investment income may be carried over and treated as incurred in
subsequent years.
26)
Investment interest includes interest expense incurred to purchase tax-exempt
securities.
27)
Taxpayers may elect to include net capital gain as part of investment income.
28)
Taxpayers may not deduct interest expense on most personal debt, including
credit card debt, car loans, and other consumer debt.
29)
Qualified residence interest consists of both acquisition indebtedness and home
equity interest.
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