ACCT 323 7980 INCOME TAX I (Spring 2016)
WEEK 3 HOMEWORK
1) On January 2, Year 1, the Philips paid $50,000 cash and obtained a $200,000 mortgage to purchase a home. In Year 4 they borrowed $15,000 secured by their home, and used the cash to add a new room to their residence. That same year they took out a $5,000 auto loan.
The following information pertains to interest paid in Year 4:
Mortgage interest $17,000 Interest on room construction loan 1,500 Auto loan interest 500
For Year 4, how much interest is deductible, prior to any itemized deduction limitations?
2) Spencer, who itemizes deductions, had adjusted gross income of $60,000 for the current year. The following additional information is available for the year:
Cash contribution to church $ 4,000 Purchase of art object at church bazaar 1,200 (with a fair market value of $800 on the date of purchase) Donation of used clothing to Salvation Army 600 (fair value evidenced by receipt received) What is the maximum amount Spencer can claim as a deduction for charitable contributions in the current year?
3) For regular tax purposes, with regard to the itemized deduction for qualified residence interest, home equity indebtedness incurred during a year:
a. Includes acquisition indebtedness secured by a qualified residence.
b. May exceed the fair market value of the residence.
c. Must exceed the taxpayer’s net equity in the residence.
d. Is limited to $100,000 on a joint income tax return.
4) Winston, a calendar-year taxpayer, was employed and resided in Boston. On February 4, 2015, Winston was permanently transferred to Florida by his employer. Winston worked fulltime for the entire year. In 2015, Winston incurred and paid the following unreimbursed expenses in relocating.
Lodging and travel expenses while moving $1,000
Meals while in route to Florida 300
Cost of insuring household goods and personal effects during move 200
Cost of shipping household pets to new home 100
Costs of moving household furnishings and personal effects 3,000
What amount of the above expenses is deductible as moving expenses on Winston’s 2015 federal tax return? Which expenses are included in the deductible amount and which expenses are excluded from the deductible amount and why?
5) For 2015, Travis and Bonnie White (both age 40) filed a joint return. Travis earned $55,000 in wages and was covered by his employer’s qualified pension plan. Bonnie was unemployed and received $4,000 in alimony payments for the first four months of the year before remarrying. The couple had no other income. Each contributed $5,000 to an IRA account. What is the maximum allowable IRA deduction on their 2015 joint tax return?
6) Which one of the following statements concerning the deduction for interest on qualified education loans is not correct?
(a) The deduction is available even if the taxpayer does not itemize deductions.
(b) The deduction only applies to the first sixty months of interest payments.
(c) Qualified education expenses include tuition fees, room, and board.
(d) The educational expenses must relate to a period when the student was enrolled on at least a half-time basis.
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