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| 1.
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Generally, the taxpayer may deduct the cost of medical expenses on Schedule A for which of the following: |
| | A) | Doctor prescribed birth control pills. |
| | B) | Controlled substances like marijuana that are in violation of federal law. |
| | C) | Trips for general health improvement. |
| | D) | Marriage counseling. |
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| 2.
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In 2006, Maria, who had adjusted gross income of $37,000, paid the following medical expenses:| Prescription medicines | $275 | | Dentist and Doctor expenses | $1,850 | | Health insurance premiums | $400 | | Two pair of eyeglasses | $185 |
What amount can Maria deduct as medical expense (after the adjusted gross income limitation) in calculating her itemized deductions for 2006? |
| | A) | $2,800 |
| | B) | $2,710 |
| | C) | $2,525 |
| | D) | $1,850 |
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| 3.
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The threshold amount for the deductibility of allowable medical expenses is: |
| | A) | 15% of AGI |
| | B) | 10% of taxable income |
| | C) | 7.5% of AGI |
| | D) | 7.5% of taxable income |
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| 4.
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Which of the following are deductible on Form 1040, Schedule A for 2006?- Property tax on principal residence.
- Garbage pickup fee itemized on a real estate bill.
- Real estate tax on property owned as an investment.
- Sales tax paid on the purchase of a personal car.
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| | A) | None of the above. |
| | B) | 1 and 3. |
| | C) | 2 and 4. |
| | D) | All of the above. |
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| 5.
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Shanika lives in California which imposes a state tax on income. For 2006 Shanika had the following transactions related to her state income taxes:| State taxes withheld in 2006 | $3,500 | | Refund received in 2006 of 2005 tax | $600 | | Assessment paid in 2006 of 2003 tax | $750 |
Shanika plans to itemize on her 2006 return. What amount of state and local taxes can she deduct as an itemized deduction in 2006? |
| | A) | $750 |
| | B) | $3,500 |
| | C) | $4,250 |
| | D) | $4,850 |
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| 6.
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Juan paid the following interest in 2006:- $150 on his personal credit card
- $9,500 on his home mortgage
- $750 on a personal car loan, which was not used for business
- $350 on funds borrowed to purchase tax-exempt securities
What is the amount of Juan's deductible interest for 2006? |
| | A) | $350 |
| | B) | $1,250 |
| | C) | $9,500 |
| | D) | $9,850 |
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| 7.
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What is the maximum amount of acquisition debt on which interest is fully deductible? |
| | A) | $1,000,000 |
| | B) | $500,000 |
| | C) | $250,000 |
| | D) | $0 |
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| 8.
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Marty and Cindy are married and are each professors at a local college. They contribute money to various organizations each year and file a joint return. Their adjusted gross income for 2006 is $100,000. They contributed to the following organizations in 2006:- $3,500 to the Sierra club
- $10,000 to the Red Cross
- $2,000 to a local political candidate
- $11,000 to cancer research foundation
- Donated clothing to Goodwill. (Marty purchased the items for $850, but the fair market value of the same items at a local second hand store is equal to $60.)
What amount can Cindy and Marty deduct as charitable contributions for 2006? |
| | A) | $26,560 |
| | B) | $26,500 |
| | C) | $25,710 |
| | D) | $24,560 |
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| 9.
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Charitable contributions to which of the following organizations qualify as itemized deductions? |
| | A) | Churches |
| | B) | State political organizations |
| | C) | Both a and b |
| | D) | None of the above |
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| 10.
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Which of the following statements is true regarding documentation requirements for charitable contributions? |
| | A) | If the total deduction for all noncash contributions for the year is more than $500, Section A of Form 8283, Noncash Charitable Contributions, must be completed. |
| | B) | A noncash contribution of less than $250 must be supported by a receipt or other written acknowledgement from the charitable organization. |
| | C) | A contribution charged to a credit card is considered a cash contribution for purposes of documentation requirements. |
| | D) | All of the above are true. |
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| 11.
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In 2006, the president of the United States declared a federal disaster due to flooding in North Carolina. Dan lives in that area and lost his home in the flood. Dan's loss: |
| | A) | Must be claimed in 2005 if his return has not been filed by the date of the loss. |
| | B) | Must be claimed in 2006 if the loss is greater than the modified adjusted gross income. |
| | C) | May be claimed in 2007 if an election is filed with the 2006 return. |
| | D) | May be claimed in either 2005 or 2006. |
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| 12.
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Malika and Henry's vacation home was completely destroyed by fire. They had no insurance to the cover the loss. On which of the following forms would they report their loss? |
| | A) | Form 4684, Casualties and Thefts, and Form 1040, as an adjustment to gross income. |
| | B) | Schedule A, Itemized Deductions, only. |
| | C) | Form 4684, Casualties and Thefts, and Schedule A, Itemized Deductions. |
| | D) | Form 4684, Casualties and Thefts, only. |
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| 13.
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The Frazin's had adjusted gross income of $140,000 in 2006. During the year their principal residence was severely damaged by a hurricane. The pertinent financial information is as follows:| Cost basis | $134,000 | | Value before casualty | $156,000 | | Value after casualty | $20,000 |
The Frazin's received an insurance reimbursement of $110,000. What is the Frazins' allowable casualty loss deduction for 2006? |
| | A) | $9,900 |
| | B) | $22,000 |
| | C) | $46,000 |
| | D) | None of the above |
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| 14.
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Which of the following is deductible as a miscellaneous itemized deduction? |
| | A) | Job hunting expenses |
| | B) | Union dues |
| | C) | Professional dues and subscriptions |
| | D) | All of the above are considered miscellaneous itemized deductions |
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| 15.
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Certain itemized deductions are subject to phase out for high-income taxpayers. Which of the itemized deductions listed below are subject to phase out? |
| | A) | Charitable contributions |
| | B) | Investment interest |
| | C) | Medical expenses |
| | D) | Personal casualty or theft losses |
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