BA 401 -- Chapter 10 Assigned Problems Problem 24 Problem 26 $4,100 Medical cost $6,400 Appraisal of $300 qualifies as a Miscellaneous Deduction. Problem 28 $38,370 Non prescription drugs are excluded. Also the cost of the appraisal is not a medical expense. The filtration system is reduced by the increase in value to the home. Problem 32 Problem 35 $9,750 The interest on the original loan (acquisition indebtedness) is fully deductible. Only part of the interest applicable to the home equity loan is deductible. There is a limitation of $100,000 of home equity debt. Interest on the $100,000 would be deductible. Study the text for the specific rules and limitation. Problem 36 a. No interest deduction in 2005 because the parties are "related". A matching of interest income and interest expense is required. The $6,000 deduction is taken in 2007 when the income is recognized by the brothers. b. Ron and Tom are cash basis taxpayers. All interest income is included in grosss income for 2007. Problem 37 a. $3,200 (80%) b. $2,880 Problem 38 Contribution of long term capital gain property results in a FMV deduction. Contribution of ordinary income property is limited to adjusted basis. or FMV (lesser of). a. This is ST Capital Gain property (ordinary income property). Deduction is limited to $11,000 b. $19,000 c. $7,000 Problem 40 a. $420,000 (limited to 50% of AGI). Cash is a 50% gift. Stock is a 30% gift. We will work through this in class. b. $80,000 Carryforward ………… five years. Problem 41 a. 54000 ……… $51,000 C/F b. 84000 …… taxpayer elects to deduct the BASIS which is a 50% contribution ….. not a 30% contribution. Problem 42 a. Tickets are deductible …………… $660 deduction. Gift to minister has no bearing (the minister is not a "qualified charitable organization") b. No deduction for the $4,000 in 2004. It was not mailed until 2006. No deduction for pledge (versus payment), even for accrual basis taxpayers. Problem 45 Problem 48 Answer: 21,483 ………………. $24,783 - (3% of 315,500 - 150,500 x 2/3). Itemized deductions are reduced once AGI exceeds $150,500. a. Answer: 65,830 ………………. $68,100 - (3% of 264,000 - 150,500 x 2/3). Itemized deductions are reduced once AGI exceeds $150,500.