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Unformatted text preview: H Chapter Eleven H ITEMIZED DEDUCTIONS SOLUTIONS TO PROBLEM MATERIALS DISCUSSION QUESTIONS 11-1 In addition to himself or herself, a taxpayer may deduct medical expenses attributable to his or her spouse and dependents. The status of a person as the taxpayer’s spouse or dependent must exist either at the time the medical services are rendered or at the time the expenses are paid. To qualify as dependents for the purposes of medical expenses, the dependents need only to meet the support test, the relationship test, and the citizenship test. The gross income test and the joint return test are waived for determining deductible medical expenses. Also, medical expenses for children of divorced parents are deductible by the parent who pays them, regardless of which parent is entitled to the dependency exemption. [See Example 1, p. 11-3, §§ 213(a) and 213(d)(1), and Reg. § 1.213-1(e)(3).] 11-2 Child-support payments are not deductible for income tax purposes. However, medical expenses (including dental costs) for children of divorced parents are deductible by the parent who pays them, regardless of which parent is entitled to the dependency exemption. Thus, F’s tax advisor is simply recommending that F directly pay for the dental work so that he will be entitled to treat the costs as deductible medical expenses. [See Example 1, p. 11-3, §§ 213(a) and 213(d)(1), and Reg. § 1.213-1(e)(3).] 11-3 A taxpayer is allowed to deduct medical expenses he or she paid on behalf of any dependent. Because K is entitled to treat her mother as a dependent in the current year, she will also be allowed to deduct any medical expenses paid on behalf of her mother. By directly paying for the cataract surgery and new eyeglasses, K can deduct these medical expenses and can treat any payment as support for purposes of the dependency exemption. (See Example 1 and p. 11-3.) 11-4 If L’s medical expenses will exceed the percentage floor (i.e., 7.5%) in the current year, the elective surgery to repair the hernia should be performed this year. The idea of timing elective surgery is to bunch medical expenses and other itemized deductions in a tax year that will yield the greatest tax benefit. It should be obvious, however, that any taxpayer who postpones necessary surgery simply to maximize a tax deduction should consider incurring the immediate cost of seeing a psychiatrist. (See pp. 11-3 through 11-5.) 11-5 Prepaid medical expenses are deductible currently only if the taxpayer is required to make the payment as a condition of receiving the medical services. This provision prevents taxpayers from maximizing their tax benefits of medical deductions simply by timing the year of payment. (See Example 2, p. 11-5.) 11-6 Prescription drugs and eyeglasses $2,050 Less 7.5% of A.G.I. ($20,000 7.5%) (1,500) Amount deductible $ 550 11- [See Example 3, p. 11-6, § 213(b), and Reg. § 1.213-1(b)(2)(i).] 11-1 11-7 W would be entitled to claim the costs incurred for these trips only if they are ‘‘primarily for and essential to...
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- Spring '09