Apply Your Knowledge Of Rules And Laws ✓ Solved

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Apply your knowledge of the rules and laws associated with itemized deductions that appear on the Schedule A tax form. Solve Problems 50, 51, 53, 54, 58, 60, 63, and 65 from the provided material.

50. Mickey is a 12-year-old dialysis patient. Three times a week for the entire year, he and his mother, Sue, drive 20 miles one way to Mickey’s dialysis clinic. On the way home, they go 10 miles out of their way to stop at Mickey’s favorite restaurant. Their total round trip is 50 miles per day. How many of those miles, if any, can Sue use to calculate an itemized deduction for transportation? Use the mileage rate in effect for 2019. Explain your answer.

51. Leslie and Jason, who are married, paid the following expenses during 2019: interest on a car loan $100; Interest on lending institution loan (used to purchase municipal bonds) $3,000; Interest on home mortgage (home mortgage principal is less than $750,000) [data incomplete]. Reggie, who is 55, had AGI of $32,000 in 2019. During the year, he paid the following medical expenses: Drugs (prescribed by physicians) $500; Marijuana (prescribed by physicians) $1,400; Health insurance premiums–after taxes $850; Doctors’ fees $1,250; Eyeglasses $375; Over-the-counter drugs $200. Reggie received $500 in 2019 for a portion of the doctors’ fees from his insurance. What is Reggie’s medical expense deduction?

53. Leslie and Jason, a married couple, paid the following expenses during 2019: Interest on a car loan $100; Interest on lending institution loan (used to purchase municipal bonds) $3,000; Interest on home mortgage (home mortgage principal is less than $750,000) $2,100. What is the maximum amount that they can use in calculating itemized deductions for 2019?

54. On April 1, 2019, Paul sold a house to Amy. The property tax on the house, which is based on a calendar year, was due September 1, 2019. Amy paid the full amount of property tax of $2,500. Calculate both Paul’s and Amy’s allowable deductions for the property tax. Assume a 365-day year.

58. Tyrone and Akira, who are married, incurred and paid the following amounts of interest during 2019: Home acquisition debt interest $15,000; Credit card interest 5,000; Home equity loan interest (used for home improvement) 6,500; Investment interest expense 10,000. Jaylen made a charitable contribution to his church in the current year. He donated common stock valued at $33,000 (acquired as an investment in 2005 for $13,000). Jaylen’s AGI in the current year is $75,000. What is his allowable charitable contribution deduction? How are any excess amounts treated?

63. Reynaldo and Sonya, a married couple, had flood damage in their home due to a dam break near their home in 2019, which was declared a federally designated disaster area. The flood damage ruined the furniture that was stored in their garage. The following items were completely destroyed and not salvageable: Damaged Items FMV Just Prior to Damage Original Item Cost Antique poster bed $6,000 $5,000 Pool table 7,000 11,000 Flat-screen TV 700 2,500 Their homeowner’s insurance policy had a $10,000 deductible for the personal property, which was deducted from their insurance reimbursement of $12,700, resulting in a net payment of $2,700. Their AGI for 2019 was $50,000. What is the amount of casualty loss that Reynaldo and Sonya can claim on their joint return for 2019?

65. Hortencia is employed as an accountant for a large firm in San Diego. For relaxation she likes to go to a nearby casino and play in blackjack tournaments. During 2019, she incurred $6,475 in gambling losses and $5,250 in gambling winnings. Hortencia plans to itemize her deductions in 2019 because she purchased a home this year and has mortgage interest expense; what amount could she claim on her return for other itemized deductions for the year?

Paper For Above Instructions

Problem 50 solution and reasoning: The medical transportation deduction uses the standard mileage rate for miles traveled for medical care. In 2019, the medical mileage rate was 20 cents per mile. The patient and caregiver can deduct miles driven for medical purposes if the travel is primarily for medical care. In Mickey’s case, the round trip total is 50 miles, but the detour to the restaurant is personal and not deductible. The deductible portion equals the miles driven to the dialysis clinic (40 miles per trip). Three trips per week for 52 weeks yield 40 miles × 3 × 52 = 6,240 deductible miles. Deduction amount = 6,240 miles × $0.20 = $1,248. This deduction is claimed by the person who incurred the medical expense (Sue), and the deduction is an above-the-line medical expense reduction for Schedule A purposes if itemizing (per IRS Publication 502). Notes: Medical transportation deductions are subject to the overall medical-expense threshold before the floor of 7.5% of AGI applies (for 2019). See IRS Pub. 502 for details on medical expenses and transportation deductions (IRS, 2019).

Problem 51 (data incomplete) and problem 53 considerations: For problem 51, the items include personal loan interest, investment loan interest tied to municipal bonds, and a mortgage interest figure incomplete but described as under $750,000. In general rules: - Personal loan interest (e.g., car loan) is not deductible as an itemized deduction. - Interest on a loan used to acquire tax-exempt municipal bonds is not deductible as investment interest expense because the investment produces tax-exempt income; the investment-interest deduction is limited to net investment income. - Mortgage interest is deductible up to the home loan debt cap (for mortgages incurred after December 15, 2017, the cap is $750,000; loans existing prior to that date may be grandfathered under prior limits). If the mortgage principal is less than $750,000, all eligible mortgage interest paid is deductible, subject to the AGI-based limitation. Without the mortgage-interest amount in problem 51, a precise numeric deduction cannot be computed; the net allowable deduction would be the mortgage interest paid, subject to the 750k cap, while the other two items would be nondeductible or limited (investing interest) depending on net investment income and the use of funds. If the mortgage interest amount is provided, simply sum permissible mortgage interest (up to cap) and apply the investment-interest limitation (up to net investment income) to the $3,000 investment-loan interest, noting that municipal-bond-related loan interest does not generate a separate deduction beyond typical investment-interest rules (IRS, Pub. 550; IRS, Pub. 502; IRS, Pub. 17).

Problem 53 solution and reasoning: Here the mortgage interest is $2,100 with principal

Problem 54 solution and reasoning: Property tax deduction is determined by the portion of the tax that the taxpayer pays during their period of ownership. The tax is calendar-year based and prepaid by Amy on April 1, 2019. Paul owned the home from Jan 1 to April 1 (3 months) and Amy owned it from April 1 to Dec 31 (9 months). If the total annual property tax is $2,500, Paul’s deductible portion would be 3/12 × 2,500 = $625, and Amy’s deductible portion would be 9/12 × 2,500 = $1,875. This allocation aligns with typical “allocable tax” rules for property taxes where the buyer and seller divide the tax based on their respective ownership periods in the year (IRS Instructions for Schedule A; IRS Pub. 936).

Problem 58 solution and reasoning: Charitable contributions of appreciated property to a public charity are generally deductible at FMV, but the deduction is limited to a percentage of AGI (30% for a donor’s long-term appreciated property). Donating stock valued at $33,000 with an AGI of $75,000 yields a deductible amount limited to 30% of AGI, i.e., 0.30 × 75,000 = $22,500. The excess amount, $33,000 − $22,500 = $10,500, can be carried forward for up to five years, subject to the same 30% AGI limit in those years (IRS Pub. 526; IRS Pub. 550; IRS Pub. 17). The donor must report the FMV charitable deduction and the carryforward details in subsequent years if the excess remains unrecovered in the current year (Tax Rule: charitable contribution carryforwards are allowed up to five years; see IRS guidelines).

Problem 63 solution and reasoning: Casualty losses in federally designated disaster areas have special rules. In this scenario, the items destroyed include a bed, pool table, and TV with FMV prior to damage of $6,000, $7,000, and $700, respectively, and original costs of $5,000, $11,000, and $2,500. The loss calculation uses the lesser of (a) adjusted basis or (b) decrease in FMV, minus any insurance reimbursements, and then must apply the $100 per casualty event floor and the 10% AGI floor to the total. The total potential loss from FMV decreases is 1,000 (bed) + 7,000 (pool table) + 0? (TV: FMV is $700; since the item is destroyed, the decrease in FMV is $700) − insurance reimbursement, which is $12,700; since the insurance reimbursement ($12,700) equals or exceeds the calculated loss (12,700 across items), the unreimbursed casualty loss is $0. Consequently, after applying the $100 floor per item and 10% AGI floor, Reynaldo and Sonya’s casualty deduction for 2019 would be $0 (assuming the full insurance reimbursement is considered; the problem’s net-outlay data supports a zero deduction). This aligns with casualty-loss deduction rules for damaged property when reimbursements cover the loss (IRS Topic No. 504; IRS Pub. 547).

Problem 65 solution and reasoning: Gambling losses are deductible to the extent of gambling winnings as an itemized deduction. Hortencia had $5,250 in gambling winnings and $6,475 in gambling losses. The allowable deduction is limited to the amount of winnings, i.e., $5,250. The excess losses ($6,475 − $5,250 = $1,225) are not deductible in the current year (they cannot be carried forward to future years under the Schedule A rules for gambling losses). The winnings are taxable income and must be reported, while the losses can only offset winnings for deduction purposes (IRS Pub. 529; IRS Pub. 17; The Journal of Accountancy guidance on gambling losses).

Note on problem 60: The provided prompt includes Problem 60 in the list but does not include its problem text. A complete solution would require the exact data for Problem 60. The general approach would mirror the rules used above, applying Schedule A itemized-deduction rules consistently with the type of deduction in problem 60 (e.g., medical, mortgage interest, casualty, or other itemized deductions) and citing the relevant IRS guidance.

References

• Internal Revenue Service. Publication 502: Medical and Dental Expenses. 2019 edition.
• Internal Revenue Service. Publication 936: Home Mortgage Interest Deduction. 2019 edition.
• Internal Revenue Service. Publication 526: Charitable Contributions. 2019 edition.
• Internal Revenue Service. Publication 550: Investment Income and Expenses. 2019 edition.
• Internal Revenue Service. Publication 17: Your Federal Income Tax. 2019 edition.
• Internal Revenue Service. Instructions for Schedule A (Form 1040). 2019 edition.
• Internal Revenue Service. Topic No. 504: Casualty, Disaster, and Theft Losses. 2019 edition.
• Internal Revenue Service. Publication 529: (Note: for gambling losses and related rules, see IRS guidelines and Pub. 17). 2019 edition.
• Gale, R. and Smith, T. (2019). Gambling losses and winnings: Tax considerations. Journal of Accountancy, 2019.
• Urban Institute/Tax Policy Center. (2020). Understanding itemized deductions after the TCJA. Tax Policy Center reports.