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Exam 10: Income, Deductions, and Credits

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Question 61

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Agnes receives a $5,000 scholarship which covers her tuition at Parochial High School. She may not exclude the $5,000 because the exclusion applies only to scholarships to attend college.

A) True
B) False

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Question 62

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A taxpayer may not deduct the cost of new curbing (relative to a personal residence), even if the construction is required by the city and the curbing provides an incidental benefit to the public welfare.

A) True
B) False

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Question 63

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Gambling losses may be deducted to the extent of the taxpayer's gambling winnings. Such losses are subject to the 2%-of-AGI floor for miscellaneous itemized deductions.

Chad pays the medical expenses of his son, James. James would qualify as Chad's dependent except that he earns $7,500 during the year. Chad may claim James' medical expenses even if he is not a dependent.

Bob and Sally are married, file a joint tax return, report AGI of $115,000, and have two children. Del is beginning her freshman year at State College during Fall 2016, and Owen is beginning his senior year at Southwest University during Fall 2016. Owen completed his junior year during the Spring semester of 2015 (i.e., he took a "leave of absence" during the 2015-2016 school year) . Both Del and Owen are claimed as dependents on their parents' tax return. ​ Del's qualifying tuition expenses and fees total $5,000 for the Fall semester, while Owen's qualifying tuition expenses were $6,100 for the Fall 2016 semester. Del's room and board costs were $3,200 for the Fall semester. Owen did not incur room and board costs, as he lived with his aunt and uncle during the year. ​ Full payment is made for the tuition and related expenses for both children at the beginning of each semester. In addition to the children's college expenses, Bob also spent $3,000 on professional education seminars during the year in order to maintain his license as a practicing dentist. Bob attended the seminars during July and August 2016. Compute the available education tax credits for Bob and Sally for 2016.

Expenses that are reimbursed by a taxpayer's employer under a dependent care assistance program can also qualify for the credit for child and dependent care expenses.

Workers' compensation benefits are included in gross income if the employer also pays the employee while the employee is recovering from his or her injury.

A taxpayer's earned income credit is dependent on the number of his or her qualifying children.

Karen, a calendar year taxpayer, made the following donations to qualified charitable organizations during the year: ​ The land had been held as an investment and was acquired 4 years ago. Shortly after receipt, the City of Terre Haute sold the land for $210,000. Karen's AGI is $450,000. The allowable charitable contribution deduction this year is:

For purposes of computing the deduction for qualified residence interest, a qualified residence includes only the taxpayer's principal residence.

For calendar year 2016, Jon and Betty Hansen (ages 59 and 60) file a joint return reflecting AGI of $280,000. They incur the following expenditures: What is the amount of itemized deductions the Hansens may claim?

Edna had an accident while competing in a rodeo. She sustained facial injuries that required cosmetic surgery. While having the surgery done to restore her appearance, she had additional surgery done to reshape her chin, which was not injured in the accident. The surgery to restore her appearance cost $9,000 and the surgery to reshape her chin cost $6,000. How much of Edna's surgical fees will qualify as a deductible medical expense (before application of the 10%-of-AGI floor) ?

Zeke made the following donations to qualified charitable organizations during the year: ​ The used clothing was donated to the Salvation Army; the other items of property were donated to Eastern State University. Both are qualified charitable organizations. Disregarding percentage limitations, Zeke's charitable contribution deduction for the year is:

The maximum credit for child and dependent care expenses is $2,100 if only one spouse is employed and the other spouse is a full-time student.

Which of the following statements is true regarding the education tax credits?

Excess charitable contributions that come under the 30%-of-AGI ceiling are always subject to the 30%-of-AGI ceiling in the carryover year.

In 2016, Boris pays a $3,800 premium for high-deductible medical insurance for himself and his family. In addition, he contributes $3,400 to a Health Savings Account. Which of the following statements is true?

Which of the following is not a requirement for an alimony deduction?

Capital assets donated to a public charity that would result in long-term capital gain if sold, are subject to the 30%-of-AGI ceiling limitation on charitable contributions for individuals.

A scholarship recipient at State University may exclude from gross income the scholarship proceeds used to pay for: