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During the current year, George made contributions totaling
$40,000 to an organization called the National Endowment for the Preservation
of Liberty (NEPL). Lacer during the year, the NEPL started giving money to a
political candidate co help with his campaign expenses. What tax issues should
George consider?

During the current year, Bob has AGI of $100,000 . He also
donated some stock to his church. He purchased the stock tvo years ago for
$55,000 . The FMV of the stock at the time of the contribution is $60,000 . Bob
has $5,000 of unused excess contributions from a prior year. What tax issues
should Bob consider?

Medical Expense Deduction. During 2019, Angela sustains
serious injuries from a snowskiing accident. She incurs the following expenses:
Angela is single and has no dependents. For the year, her
salary is $58,000. She pays $600 in medical and dental insurance premiums,
which is withheld from her paycheck on an after-tax basis, $6,750 in mortgage
interest on her home, and $1,200 in interest on her car loan. Her health
insurance provider reimburses her for $10,000 of the medical expenses. What is
her 2019 taxable income?

Reimbursement of Previously Deducted Medical Expenses.
Assume the same facts as in Problem I:8-34. In addition, assume that in 2020,
Angela receives an additional $7,000 in a settlement of a lawsuit arising
because of the snow-skiing accident. $4,000 of the settlement is to pay
Angela’s medical bills, and $3,000 is to reimburse her legal expenses. What is
the proper tax treatment of this $7,000 settlement?

Medical Expense Deduction . In 2019, Charla, a single
taxpayer with no dependents, was severely hurt in a farm accident. Charla is 38
years old. The accident left Charla’s legs 85% paralyzed. After incurring
$14,000 of medical expenses at the hospital, the doctor recommended that Charla
install a pool at her home for therapy. The pool cost $25,000 to install and
increased the value of her home by $22,000. She spent $930 maintaining the pool
in 2019 and $1,060 in 2020. Charla also purchased a wheelchair on December 28,
2019, for $2,300, which she charged to her credit card. She paid her credit
card bill on January 6, 2020. She also purchased a hospital bed for $3,800 but
did not pay for the bed until 2020. Charla paid her physical therapist $4,000
for services performed in 2020. Charla paid $1,200 in medical insurance
premiums on an after-tax basis in both 2019 and 2020. In 2020, the insurance
company reimbursed Charla $9,000 for her hospital stay in 2019. Her AGI for
2019 and 2020 is $38,000 and $43,000, respectively, not considering any of the
above items. Charla has no other itemized deductions in either year.
a. What is Charla’s taxable income for 2019?
b. What is Charla’s medical expense deduction for 2020? How
does she treat the reimbursement?

Deduction of Taxes. Joyce is a single, cash-method taxpayer.
On April 11, 2018, Joyce paid $120 in stare income taxes with her 2017 state
income tax return. During 2018, Joyce had $1,600 in stare income taxes
withheld. On April 13, 2019, Joyce paid $200 with her 2018 state tax return.
During 2019, she had $2,100 in state income taxes with – held from her
paycheck. Upon filing her 2019 tax return on April 15, 2020, she received a
refund of $450 for excess state income taxes withheld. Joyce had total AGI in 2019
and 2020 of $51,000 and $53,500, respectively. In 2019, Joyce also paid $10,500
in qualified residence interest.
a. What is the amount of state income taxes Joyce may
include as an itemized deduction for 2018?
b. What is Joyce’s allowed itemized deduction for state
income taxes for 2019?
c. What is Joyce’s taxable income for 2019?

Deduction of Taxes. Dawn, a single, cash-method taxpayer,
paid the following taxes in the current year: Dawn’s employer withheld $5,400
for federal income taxes, $2,000 for state income taxes, and $3,800 for FICA
from her paychecks. Dawn purchased a new car and paid $600 in sales tax and $70
for the license. The car’s FMV was $20,000 and it weighed 3,000 pounds. The
county also assessed a property tax on the car. The tax was 2 % of the car’s
value and $10 per hundredweight. Dawn uses the car 100 % of the time for
personal purposes. Dawn sold her house on April 15 of the current year. The
county’s property tax on the home for the year is $1,850, payable on February 1
of the current year. The county’s real property tax year is the calendar year.
Dawn ‘s AGI for the year is $50,000 and her other itemized deductions exclusive
of taxes are $8,000 (disregard any leap year).
a. What is Dawn ‘s deduction for taxes in the current year?
b. Where should Dawn report her deduction for the taxes on
her tax return?

Apportionment of Real Estate Taxes. On May 1 of the current
year, Tara sells a building to Janee for $500,000. Tara’s basis in the building
is $300,000. The county in which the building is located has a real property
tax year that ends on June 30. The taxes are payable by September 1 of that
year. On September 1, Janet pays the annua l property taxes of $6,000. Boch
Tara and Janet are calendar-year, cash method taxpayers. The closing agreement
does nor separately account for the property taxes. Disregard any leap year.
a. What amount of real property taxes may Janee deduct in
the current year?
b. What amount of real property taxes may Tara deduce in the
current year?
c. If no apportionment on the real property taxes is made in
the sales agreement, what is Tara’s tota l selling price of the building?
Janet’s basis for the building?

Classification of Interest Expense . On January 1 of the
current year, Scott borrows $80,000, pledging the assets of his business as
collateral. He immediate ly deposits the money in an interest-bearing checking
account. Scott already had $20,000 in this account. On April 1, Scott invests
$75,000 in a limited real estate partnership. On July 1, he buys a new ski boat
for $12,000. On August 1, he makes a $10,000 capita l contribution to his
unincorporated business. Scott repays $50,000 of the loan on November 30 of the
current year. Classify Scott’s interest expense for the year.

Investment Income and Deductions. During the current year,
Travis takes out a $40,000 loan, using stock he owns as collateral. He uses
$10,000 co purchase a car, which he uses 100 % for personal use. He uses the
remaining funds to purchase stocks and bonds. He pays $3,200 interest on the
loan. Travis also reports the following for the year:
Travis is single. What is his net taxable income?