2009-Ch10solutions - CHAPTER 10 DEDUCTIONS AND LOSSES:...

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CHAPTER 10 DEDUCTIONS AND LOSSES: CERTAIN ITEMIZED DEDUCTIONS SOLUTIONS TO ASSIGNED PROBLEMS 2. Barbara may not include as medical expenses the following items that were incurred for the general improvement of her health: $840 dues at a health club incurred for the purpose of improving her general physical condition. $240 for multiple vitamins and antioxidant vitamins. She may include as medical expenses the $500 cost of the smoking cessation program, but may not include the $240 cost of the nonprescription nicotine gum. While the cost of nonprescription drugs is generally not deductible, the $600 spent on insulin is deductible. Funeral expenses of $7,200 do not qualify as medical expenses. pp. 10-3, 10-4, and Exhibit 10-1 6. A medical expense does not have to relate to a particular ailment to be deductible. The definition of medical care is broad enough to cover preventive measures. Consequently, the cost of periodic physical and dental exams qualifies even though the taxpayer is in good health. Also, the cost of the treatment to stop smoking can be included in medical expenses. Costs incurred in a weight loss program related to obesity may be includible in medical expenses if within the IRS guideline. pp. 10-3, 10-4, and Exhibit 10-1 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 24. TAX FILE MEMORANDUM February 26, 2009 FROM: Sam Massey SUBJECT: Emma Doyle’s medical expense deduction Emma Doyle’s medical expense deduction is $8,950, determined as follows: Medical insurance premiums $ 3,700 Doctor and dentist bills for Bob and April 6,800 Doctor and dentist bills for Emma 5,200 Prescription medicines for Emma 400 Nonprescription insulin for Emma 350 Total medical expenses $16,450 Less: 7.5% of $100,000 (AGI) (7,500) 10-1
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10-2 2009 Individual Volume/Solutions Manual Deductible portion of medial expenses $ 8,950 Although Bob and April cannot be claimed as Emma’s dependents, they could have been had they not filed a joint return. Therefore, medical expenses incurred on their behalf qualify for the medical expense deduction. Insulin is an exception to the rule that nonprescription drugs do not qualify as medical expenses. The insurance recovery was not received until 2009. Therefore, it has no effect on the medical expense deduction for 2008. pp. 10-2 to 10-9 and Exhibit 10-1 25. The amount that qualifies for the medical expense deduction is $14,900 ($11,000 + $2,200 + $1,700). The room and board for Lakeside qualifies because the move was motivated by Lawrence’s need for medical care. The cable fee is a personal expense. p. 10-3 and Examples 4 and 37 26. Only $6,300 of the cost of the system qualifies since $2,500 of the $8,800 cost of the dust elimination system increased the value of Roberto’s residence. The total medical expense
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2009-Ch10solutions - CHAPTER 10 DEDUCTIONS AND LOSSES:...

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