19 Upon the recommendation of a physician Mark has an air fi

19. Upon the recommendation of a physician, Mark has an air fitration system instmtter, Mark incurs residence. He suffers from severe allergy problems. In connection wi and pays the following amounts during the current year stalled in his personal with this matter, M Filtration system and cost of installation Increase in utility bills due to the system $7,000 800 The system has an estimated useful life of 5 years. The appraisal was to determine the value of Mark\'s resid ence with and without the system. The value of Mark\'s residence by $700. Expenses qualifying for the medical deduction in the current year total: a. $7,000 b. $7,100. c. $7,700. d. $8,050. e. None of the above. 20. During the current year, Justin, a self-employed individual, paid the following amounts: Federal income tax State income tax Real estate taxes on home in Europe State sales taxes $5,000 3,000 800 600 What is the maximum amount Justin can claim as taxes by itemizing deductions from AGI? a. $3,000. b. $3,400. c. $3,800 d. $4,400. e. None of the above 21. Roland uses the cash method of accounting and lives in a state that imposes an income tax (including withholding from wages). In all relevant years, Roland itemizes his deductions and claims a deduction for state income taxes. On April 13, 2017, he files his state return for 2016 claiming a refund of $600. Roland receives the refund on August 3, 2017. During 2017, his withholdings for state income tax purposes amount to $3,900. How much can Roland claim as a deduction for state income taxes on his Federal return for calendar year 2017 (filed in April 2018)? a. $3,300. b. $3,700. c. $3,900 d. $4,300. e. None of the above. Page 7 of 11

Solution

19. (b) 7,100

Total Expenses qualifying for medical deduction:

Filteration system and cost of installation = (7000-700) = 6,300

Increase in utility bills due to system = 800

Total deduction = 7,100

20. As per IRS the taxes paid can be claimed as deduction under itemized deductions. There are 4 types of deductible taxes paid :

- State, local and foreign Income Tax

- State Sales Tax

- Foreign Real Extate Taxes

- Local Personal Property Taxes

Total Itemized Deductions Allowable from AGI = 3000+800+600 = 4,400

21. c. 3900

Deduction of State Income Tax withheld is allowable