1. Wallace and Diana are married (both are 35 years old) and together have an AG
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Question
1. Wallace and Diana are married (both are 35 years old) and together have an AGI of $30,000. They have two dependents and file a joint return for 2015. During 2015, each pays $2,400 for medical insurance. During the year, they paid the following amounts for medical care: $8,000 in doctor and dentist bills and hospital expenses, and $1,500 for prescribed medicines and drugs. In December of 2015, they received an insurance reimbursement of $3,700 for hospital expenses. Determine the deduction allowable for medical expenses paid during 2015. a. $14,500. b. $12,250. c. $10,600. d. $7,600
2. Anthony and Susan, married taxpayers, took out a mortgage on their home for $250,000 in 2002. In May of 2015, when the home had a fair market value of $325,000 and they owed $200,000 on the mortgage, they took out a home equity loan for $140,000. They used the funds to purchase a single engine airplane to be used for recreational travel purposes. What is the maximum about of debt on which they can deduct home equity interest? a. $60,000. b. $100,000. c. $125,000. d. $140,000.
3. Frank owned stock in Sapphire Corporation that he donated to a university (a qualified charitable organization) on December 30, 2015. What is the amount of Frank's deduction assuming that he had purchased the stock for $20,000 on January 3, 2015, and the stock had a fair market value of $35,000 when he made the donation? Frank's AGI is $400,000. a. $20,000. b. $27,500. c. $35,000. d. None of the above.
Explanation / Answer
1. Total expenses incurred during the year for the purpose of medical is as below
Medicall insurance for both children = $ 2400*2 = $ 4800
Medical care expenses = $ 8000
Medicine and drugs = $ 1500
Total expense incurred during the year = $4800 + $8000 + $1500 = $14300
They recived insurance claim money from insurance company is $ 3700
Hence total allowable expenditure for deduction purpose is $ 14300 - $ 3700 = $ 10600 , hence answer is " C "
2. Maximum amount of debt on which they can deduct home equity interest is $ 60000 ( $200000 - $140000)
3. As stock purchased after 1981 and fair market value of the stock is more at the time of donation , allowable expense for dedcution is $ 35000 which is fair market value
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