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Qualified Residen ce Interest. During the current year, Tina
purchases a beachfront con – dominium for $600,000, paying $150,000 down and
taking out a $450,000 mortgage, secured by the property. Ac the time of the
purchase, the outstanding mortgage on her principal residence is $700,000. This
debt is secured by the residence. The FMV of the principal residence is $1,400,000.
She purchased the principa l residence in 1997. What is the amount of qualified
indebtedness on which Tina may deduce the interest payments?

Interest Between Related Parties. Crown Corporation is an
accrual method taxpayer owned 55% by Brett and 45 % by Susie. Brett and Susie
are good friends and have been business associates for several years. BJ
Partnership is a cash method taxpayer, owned 40 % by Brett and 60% by Jeremy,
Brett’s uncle. Both Crown Corporation and BJ Partnership are calendar year
entities. On January 5 of the current year, Crown borrows $50,000 from BJ
Partnership and pays 8% interest on the loan. Crown must pay the interest on
January first of next year.
a. What amount of interest expense can Crown Corporation
deduce in the current year?
b. How wou ld your answer change if Jeremy were Brett’s
brother, instead of his uncle?

Timing of Interest Deduction. On April 1 of the current
year, Henry borrows $12,000 from the bank for a year. Because the note is
discounted for the interest charge and Henry receives proceeds of $10,200, he
is required to repay the face amount of the loan ($12,000 ) in four equal
quarterly payments beginning on July 1 of the current year. Henry is a cash
method individual.
a.What is the amount of Henry ‘s interest expense deduction
in the current year with respect co this loan?
b. Assume the same faces except chat the initial starting
dace when the repayments begin is April 1 of the following year. What is the
amount of Henry’s interest expense deduction in the current year?
c. Assume the same facts as in Pare b, except that Henr y is
an accrual method taxpayer and the loan will be outstanding for one year. What
is the amount of his interest expense deduction in the current year?

Itemized Deductions . During 2019, Doug incurs the following
deductible expenses: $2,300 in state income taxes, $3,000 in local property
taxes, $800 in medical expenses, and $2,000 in charitable contributions. Doug
is 33, single, has no dependents, and has $35,000 AGI for the year. What is the
amount of Doug ‘s taxable income?

Computation of Taxable Income . During 2019, James, a
single, cash method taxpayer incurred the following expenditures:
James’ income consisted of the following items:
a. Compute James’ taxable income for the year (assuming that
he makes an election to have the nee capital gain taxed at the regular tax
races).
b. What is James ‘ investment interest carryover (if any)?

Computation of Taxable Income. Assume all the same faces as
in Problem 1:8-48 except that James’ salary income is $130,000 instead of
$70,000 and that he does not make the election. Compute James ‘ taxable income
for the year.

Charitable Contributions: Services. Donna is an attorney who
renders volunteer legal services to a Legal Aid Society, which provides legal
advice co low-income individuals. The Legal Aid Society is a qualified
charitable organization. During the current year she spends a total of 200
hours in this volunteer work. Her regular billing rate is $350 per hour. In
addition, she spends a total of $800 in our-of -pocket costs in providing these
services. She receives no compensation and is not reimbursed for her
ouc-ofpocket costs. What is Donna ‘s charitable contribution for the year
because of these activities?

Charitable Contribution Limitations . In each of the
following independent cases, determine the amount of the charitable
contribution and the limitation chat would apply. In each case, assume chat the
donee is a qualified public charity.
a. Sharon donates a tract of land co a charitable
organization. She has held the land for seven years. Her basis in the land is
$10,000 and its FMV is $40,000.
b. Assume the same facts in Pare a, except that Sharon has
held the land for only 11 months and chat its FMV is $23,000.
c. Jack purchases a historical document for $50,000. He
donates the historical docu – ment co a charitable organization two years
lacer. The organization plans to use it for research and study. Its FMV at the
time of the donation is $100,000.
d. Assume the same faces in Pare c, except that the
organization plans to sell the document and put the money into an endowment
fund.
e. Valerie donates some inventory co a charitable
organization. The inventory is not food or clothing. The inventor y is
purchased for $500 and its FMV is $1,200 at the time of the donation. She held
the inventory for seven months.

Charitable Contributions to Private Nonoperating
Foundations. Assume the same facts as Problem I:8-51, except that the qualified
organization is a private nonoperating foundation. Determine the amount of the
charitable contribution for Parts a through e.

Charitable Contribution Limitations. During the current
year, Helen donates stock worth $50,000 to her local community college. Two
years ago the stock cost Helen $40,000. Her AGI for the current year is
$100,000. Beginning next year, the bulk of her income will be from tax -exempt
municipal securities. Thus, she is not interested in any carryover of excess
charitable contribution. What is the maximum charitable contribution deduction
Helen may take this year?