Exam (elaborations)
TAX 4001 Exam 1- chapter 3.
TAX 4001 Exam 1- chapter 3.
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TAX 4001 Exam 1- chapter 3Apart from cash, what are the two types of property that can be contributed to charity for
a deduction, and what are the dedcutions fro each? - ANS-1- Ordinary Income Property:
if the property is sold, it would generate ordinary income
DEDUCTION: FMV- amount of gain that would be generated if the item was sold
2- Capital Gain Property
DEDUCTION: FMV of property
**2 exemptions
Deemed substantiation - ANS-Employers give employees per diem to spend- so
employees do not need proof of their expenses. MUST USE THE LESSOR OF: the per
diem rate by company or federal per diem rate
Examples of expenses recorded in the actual cost method to deduct transportation
miles - ANS-gas, oil, DEPRECIATION, lease payments, insurance, repairs, licenses,
registration fees * MULTIPLIED BY THE % USED IN BUSINESS + tolls and parking
fees added on top
For state and local income taxes, deduct these 3 amounts paid during the year: - ANS--
amounts with held from income
- estimated tax payments
- amounts paid for prior years liability
How are medical insurance premiums deducted for self employed people? -
ANS-Normal employees deduct premiums as from AGI expenses included in the total
medical expenses (subject to 7.5% AGI floor)
Self employed people, however, can deduct medical insurance premiums paid as FOR
AGI deductions
If a person chooses to deduct state sales taxes, they can either: - ANS-1- use their
actual sale amounts
2- use the amounts from the IRS table
List the interest expenses that are included in itemized deductions? - ANS-- student
loan interest ($2500 cap)
- qualified residence interest (mortgage interest on first or second home)
- mortgage insurance premiums
- points paid to purchase principle residence are fully deductible
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