Chap8%20HW%20Solutions

Chap8%20HW%20Solutions - 124 CCH Federal Taxation-Basic...

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124 CCH Federal Taxation—Basic Principles ¶8775 Wagering Losses Losses sustained during the year on wagering transactions are allowed as a deduction but only to the extent of the gains during the year from wagering. If gambling is conducted as a business, the losses are deductible as business losses, but only to the extent of gains. Losses of nonprofessional gamblers are nonbusiness losses and are deductible (to the extent of gains) only if itemized. They are not subject to the 2 percent floor on miscellaneous itemized deductions. ¶8785 Unrecovered Investment in Annuity If a taxpayer dies before the entire cost of an after-tax annuity is recovered tax-free, any unrecovered cost of the annuity can be deducted as a miscellaneous deduction on the taxpayer's final tax return. ANSWER TO KEYSTONE PROBLEM—CHAPTER 8 (¶8605.) Under Assumption 1: If an individual is self-employed, all trade or business expenses are deductible for adjusted gross income (AGI). Since Ralph is self-employed, $8,800 of business expenses incurred by Ralph is deductible for AGI. The $8,800 of business expenses consists of $5,000 in travel expenses, $2,600 in transportation expenses, and $1,200 in entertainment expenses. Only 50 percent of entertainment expenses is deductible for tax purposes ($2,400 × 50% = $1,200). Under Assumption 2: When an employee incurs employee expenses which exceed employer reimbursement, the excess expenses are deductible on the employee's tax return. Only 50 percent of the excess entertainment expenses is deductible for tax purposes. All of the excess employee expenses are deductible as miscellaneous itemized deductions subject to the 2 percent of AGI limitation. ANSWERS TO QUESTIONS—CHAPTER 8 Topical List of Questions 1. Medical Expenses Limits (¶8001) 2. Medical Expenses: Capital Expenditures (¶8025) 3. Medical Transportation Costs (¶8035) 4. Deductible Medical Expenses (¶8035, ¶8045, ¶8055) 5. Deductible Medical Expenses (¶8035, ¶8045, ¶8055) 6. Personal Property Taxes (¶8105) 7. State and Local Income Tax Refunds (¶8115) 8. Deductible Taxes (¶8101, ¶8105, ¶8115) 9. Deductible Taxes (¶8101, ¶8105, ¶8115) 10. Prepaid Interest (¶8265) 11. Net Investment Income Definition (¶8225) 12. Charitable Organizations: Categories (¶8301) Chapter 8
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Instructor's Manual 125 13. Private Operating v. Nonoperating Foundation (¶8301) 14. Charitable Services Deduction (¶8315) 15. Unrelated Use Charitable Contributions (¶8325) 16. Charitable Contributions Carryovers (¶8325) 17. Charitable Contributions Appraisals (¶8355) 18. Casualty Loss Definition (¶8501) 19. Theft Losses (¶8525) 20. Employee Expenses (¶8601) 21. Nonaccountable Reimbursement Plans (¶8603) 22. Job-Seeking Expenses (¶8655) 23. Education Expenses (¶8665) Answers to Questions Medical Expenses Limits 1. Medicines and drugs are limited to prescription medicines and drugs. Total unreimbursed medical expenses must be reduced by 7.5 percent of adjusted gross income.
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Chap8%20HW%20Solutions - 124 CCH Federal Taxation-Basic...

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