ch. 10 solutions

West Federal Taxation 2008: Individual Income Taxes, Professional Version (West's Federal Taxation: Individual Income Taxes)

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Chapter 10 1. a. Yes. A traditional IRA deduction will decrease adjusted gross income, which is the base for determining the medical expense deduction (i.e., 7.5% × AGI). b. Increase. A lower AGI will result in a smaller nondeductible amount of medical expenses and a larger medical expense deduction. pp. 10-2 and 10-3 7. David, who is self-employed, may deduct 100% of the premium of $7,500 as a deduction for AGI. Joan, who is an employee, may include the premiums of $8,000 she paid in computing her itemized deduction for medical expenses (subject to the 7.5% floor). Example 10 8. Arturo, a calendar year taxpayer, paid $16,000 in medical expenses in 2007. Even if he expects $12,000 of these expenses to be reimbursed by an insurance company in 2008, he can include all $16,000 of the expenses in determining his medical expense deduction for 2007. He is not required to consider the potential reimbursement in computing his medical expense deduction for 2007. Casualty losses must be reduced if there is an expectation of reimbursement. Therefore, Arturo’s starting point in computing the casualty loss deduction is $6,000 ($20,000 loss – $14,000 expected reimbursement). Further reductions are required for the $100 floor and the 10% of AGI floor. pp. 10-7 and 10-8 24. Derek and Cynthia can claim a medical expense deduction for the current year of $2,200, determined as follows: Physician bills, dentist bills, and hospital expenses $ 6,900 Less: Reimbursement (2,500) Unreimbursed expenses $ 4,400 Health insurance premiums 3,000 Prescribed medicines and drugs 2,300 Total medical expenses $ 9,700 Less: 7.5% of $100,000 (AGI) (7,500) Deductible medical expenses $ 2,200
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ch. 10 solutions - Chapter 10 1. a. Yes. A traditional IRA...

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