Linda, a single taxpayer, purchased a 10-acre tract of undeveloped land outside

Question

Linda, a single taxpayer, purchased a 10-acre tract of undeveloped land outside of Durham, NC as a long-term investment. She financed the purchase with a mortgage from BB&T.

This year she paid $3,000 of interest on the mortgage and $700 in property taxes.

These are her only itemized expenses.

What is Linda's best course of action from a tax standpoint?

Itemize the $3,700 of deductions even though it's less than the standard deduction because at least she will get some value out of them.

Use the standard deduction for single taxpayers and elect to add the $3,700 to her basis in the land.

Itemize the $3,700 of deductions even though it's less than the standard deduction because at least she will get some value out of them.

Use the standard deduction for single taxpayers and elect to add the $3,700 to her basis in the land.

Explanation / Answer

Solution: Use the standard deduction for single taxpayers and elect to add the $3,700 to her basis in the land.

Explanation: The standard deduction lowers Linda's income by one fixed amount. Conversely, itemized deductions are made up of a list of eligible expenses thus Linda should which lowers the tax bill the most. Linda should claim itemized deductions on Form 1040, Schedule A if is more than the standard deduction which is not the case in given situation.

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