Chapter+7 - AF 450 Federal Taxation I Dr. Julia M. Camp...

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AF 450 – Federal Taxation I Dr. Julia M. Camp Solutions to Suggested Problems Chapter 7: 1, 2, 3, 4, 7, 11, 15, 20, 21, 26, 35, 36, 39, 40, 42, 47, 50, 51, 53, 54, 60 I:7-1 a. A taxpayer may deduct medical expenses incurred on behalf of the taxpayer, the taxpayer's spouse, and the taxpayer's dependents. The taxpayer may also deduct medical expenses paid for an individual who would otherwise qualify as a dependent except for the fact that the gross income test is not met, even though the taxpayer may not take an exemption for the individual. b. No. Medical expenses incurred by the divorced parents of a child are deductible by whichever parent incurs the expenses, even though the parent incurring the expenses is not entitled to the dependency exemption for the child. p. I:7-2. c. The taxpayer who is the subject of a multiple support agreement is treated as the dependent of the taxpayer who is entitled to take the dependency exemption. Since a taxpayer may deduct medical expenses (subject to the 7.5% of AGI limit) incurred for a dependent, the taxpayer entitled to the dependency exemption under the multiple support agreement should be the one who pays the medical expenses. I:7-2 Medical care is defined as amounts paid for: 1. The diagnosis, cure, mitigation, treatment, or prevention of disease. 2. The purpose of affecting any structure or function of the body. (Medical expenses incurred for cosmetic surgery are not deductible). 3. Transportation primarily for and essential to the first two items listed above. 4. Long-term care services for the chronically ill. Chronically ill generally is defined as the loss of certain daily living activities such as eating, toileting, bathing, dressing, and continence. 5. Insurance covering all of the items above. However, the deductibility of long-term care insurance premiums is subject to a dollar ceiling based on age. p. I:7-3. I:7-3 a. The Internal Revenue Code defines cosmetic surgery as any procedure that is directed at improving the patient's appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease. b. In general, the cost of cosmetic surgery is not deductible unless it is necessary to ameliorate a deformity arising from or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease. p. I:7-4. I:7-4 a. The cost of lodging and 50% of the cost of meals incurred en route to obtain medical treatment generally is deductible as a medical expense. However, the cost of meals on trips too short to warrant a stop for meals is not deductible. En route transportation, 50% of meals and lodging costs for a nurse, parent, or spouse are also
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deductible if the sick or injured individual is unable to travel alone. Note, however, that the IRS’s position is that the cost of meals en route is not deductible. b.
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Chapter+7 - AF 450 Federal Taxation I Dr. Julia M. Camp...

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