negativeitemincalculatinggrossincomeiegrossincomegrossprofit

This preview shows page 5 - 9 out of 9 pages.

negative item in calculating gross income (i.e., gross income = gross profit) rather than as a deduction.
Question 3 Page 6 Correct answer (b); See Page 6-15 and example 27. 5
FEDERAL INCOME TAX MIDTERM SPRING 2018 Name: __________________________________________________________ Question 1 Page 7 Correct answer (e). Question 2 Page 7 Correct answer (d).    Question 3 Page 7 Correct answer (d). In allocating basis to IRA distributions a ratio must be calculated to determine how much of each dollar is allocated towards the basis (and tax free) vs. non-basis and subject to ordinary income tax.   In this instance the combined IRA balance is: 9,000 + 21,000 = $30,000 Non Deductible Contributions/Basis:  $11,000   $6,000 * 11,000/30,000 = $2,200 6
FEDERAL INCOME TAX MIDTERM SPRING 2018 Name: __________________________________________________________ Question 1 Page 8 Correct answer (b). Fred and Lucy can claim an itemized medical expense deduction for the current year of $800, determined as follows: Physician bills, dentist bills, and hospital expenses $ 9,200  Less: Reimbursement (4,400) Unreimbursed expenses $ 4,800  Health insurance premiums 5,000  Prescribed medicines and drugs     3,000  Total medical expenses $12,800  Less: 7.5% of $120,000 (AGI)  (9,000) Deductible medical expenses $    3,800    Question 2 Page 8
7
FEDERAL INCOME TAX MIDTERM SPRING 2018 Name: __________________________________________________________ The tuition of $6,000 is a personal expense that cannot be deducted as a charitable contribution. Question 3 Page 8
Question 1 Page 9 Correct answer (c).  $30,000 (cash) + $135,000 (30% × $450,000 AGI) = $165,000. The capital gain property is limited to 30% of $450,000 AGI, or $135,000. The carryover to the next five years is $75,000 [$210,000 (FMV of the land) – $135,000 (deduction allowed for the current year)]. If the reduced deduction election is made, the deduction becomes $100,000 [$30,000 (cash) + $70,000 (basis of land)]. 8
FEDERAL INCOME TAX MIDTERM SPRING 2018 Name: __________________________________________________________ 9

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture