Chapter 4


48. Under the terms of a divorce decree executed May 1, 2014, Ahmed transferred a house worth $650,000 to his ex-wife, Farah, and was to make alimony payments of $3,000 per month. The property has a tax basis to Ahmed of $300,000.


a. How much of this must be reported on Farah’s tax return?


b. Of that amount, how much is taxable gain or loss that Farah must recognize related to the transfer of the house?


50. Indicate whether each of the following items is considered a for AGI (above-the-line) deduction for the 2014 tax year:

a. Student loan interest.

b. Gambling losses.

c. Early withdrawal penalty.

d. Child support payments.

e. Charitable contributions.

f. One-half of self-employment taxes.

g. Alimony.

h. Scholarships for tuition and books.

i. Moving expenses.

j. Property taxes

k. Self-employed health insurance premiums.


Chapter 5


52. Steve purchased a personal residence from Adam. In order to sell the residence, Adam agreed to pay $4,500 in points related to Steve’s mortgage. Discuss the tax consequences from both Steve’s and Adam’s perspectives.


59. Reynaldo and Sonya, a married couple, had flood damage in their home due to a family water heater during 2014, which ruined the furniture in their garage. The following items were completely destroyed and not salvageable:


Damaged Items                         Fair Market Value Just Prior to Damage             Original Item Cost

Antique Poster Bed                          $6,000                                                                  $5,000

Pool Table                                          7,000                                                                   11,000

Large-screen TV                                 700                                                                       2,500


Their homeowner's insurance policy had a $10,000 deductible for the personal property, which was deducted from their insurance reimbursement of $12,700, resulting in a net .payment of $2,700. Their AGI for 2014 was $40,000. What is the amount of casualty loss that Reynald and Sonya can claim on their joint return for 2014?



60. During the year 2014, Ricki, who is not self-employed and does not receive employer reimbursement for business expenses, drove her car 5,000 miles to visit clients, 10,000 miles to get to her office, and 500 miles to attend business-related seminars. All of this mileage was incurred ratably throughout the year. She spent $300 for airfare to another business seminar and $200 for parking at her office. Using the automobile expense rates in effect for 2014, what is her deductible transportation expense?





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