Question 1. During 2014, Kathy, who is self-employed, paid $650 per m

1. During 2014, Kathy, who is self-employed, paid $650 per month for an HSA contract that provides medical insurance coverage with a $3,000 deductible. The plan covers Kathy, her husband, and their three children. Of the $650 monthly fee, $300 was for the high-deductible policy, and $350 was deposited into an HSA. How much of the amount paid for the high-deductible policy can Kathy deduct as a deduction forAGI?

2. Shirley sold her personal residence to Mike for $400,000. Before the sale, Shirley paid the real estate taxes of $7,030 for the calendar year. For income tax purposes, the deduction is apportioned as follows: $4,000 to Shirley and $3,030 to Mike.

a. What is Mike’s basis in the residence?

b. What is Shirley’s amount realized from the sale of the residence?

c. What amount of real estate taxes can Mike deduct?

d. What amount of real estate taxes can Shirley deduct?

3. Brian, a self-employed individual, pays state income tax payments of:

$900 on January 15, 2014 (4th estimated tax payment for 2013)

$1,000 on April 15, 2014 (1st estimated tax payment in 2014)

$1,000 on June 16, 2014 (2nd estimated tax payment in 2014)

$1,000 on September 15, 2014 (3rd estimated tax payment in 2014)

$800 on January 15, 2015 (4th estimated tax payment of 2014)

Brian had a tax overpayment of $500 on his 2013 state income tax return and applied this to his 2014 state income taxes. What is the amount of Brian’s state income tax itemized deduction for his 2014 Federal income tax return?

4. In Piatt County, the real property tax year is the calendar year. The real property tax becomes a personal liability of the owner of real property on January 1 and is payable on July 1 in the real property tax year. On June 30 of this year (assume not a leap year), Harry sells his house to Judy for $110,000 and on July 1, Judy pays the entire real estate tax of $4,380 for the current year ending December 31.

a. How much of the property taxes may Harry deduct?

b. How much of the property taxes may Judy deduct?

5. Ross, who is single, purchased a personal residence eight years ago for $170,000 and took out a mortgage of $100,000 on the property. In May of the current year, when the residence had a fair market value of $220,000 and Ross owed $70,000 on the mortgage, he took out a home equity loan for $110,000. He used the funds to purchase a BMW for himself and a Lexus SUV for his wife. For both vehicles, 100% of the use is for personal activities. What is the maximum amount on which Ross can deduct home equity interest?

6. Georgia had AGI of $100,000 in 2014. She donated Heron Corporation stock with a basis of $8,500 to a qualified charitable organization on July 5, 2014.

a. What is the amount of Georgia’s deduction, assuming that she purchased the stock on December 4, 2013, and the stock had a fair market value of $15,000 when she made the donation?

b. Assume the same facts as in a., except that Georgia purchased the stock on July 1, 2006.

c. Assume the same facts as in a., except that the stock had a fair market value of $6,000 (rather than $15,000) when Georgia donated it to the charity.

7. Linda, who has AGI of $120,000 in the current year, contributes stock in Mauve Corporation (a publicly traded corporation) to the Salvation Army, a qualified charitable organization. The stock is worth $65,000, and Linda acquired it as an investment four years ago at a cost of $50,000.

a. What is the total amount that Linda can deduct as a charitable contribution, assuming she carries over any disallowed contribution from the current year to future years?

b. What is the maximum amount that Linda can deduct as a charitable contribution in the current year?

c. What factors should Linda consider in deciding how to treat the contribution for Federal income tax purposes?

d. Assume Linda dies in December of this year. What advice would you give the executor of her estate with regard to possible elections that can be made relative to the contribution?

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