53) Chee, Single, Age 40, Had the Following Income and Expenses During the Year (Not A

53) Chee, single, age 40, had the following income and expenses during the year (not a leap year):

Income:

Salary ………………………………………………………….. $43,000

Rental of vacation home (rented 60 days, used

Personally 60 days, vacant 245 days)…………………………. $4,000

Municipal bond interest ……………………………………….. $2,000

Dividend from General Motors………………………………… $400

Expenses:

Interest

On home mortgage……………………………………………. $8,400

On vacation home ……………………………………………. $4,758

On loan used to buy municipal bonds………………………… $3,100

Taxes:

Property tax on home………………………………………….. $2,200

Property tax on vacation home………………………………... $1,098

State income tax………………………………………………. $3,300

Charitable contributions………………………………………. $1,100

Tax return preparation fee…………………………………….. $300

Utilities and maintenance on vacation home………………….. $2,600

Depreciation on rental 50% of vacation home………………... $3,500

Calculate Chee’s taxable income for the year before personal exemptions.

28) During the current year, Susan incurred and paid the following expenses for Beth (her daughter), ED (her father), and herself.

Surgery for Beth……………………………………………….. $4,200

Red RiverAcademy charges for Beth

Tuition………………………………………………………… $5,600

Room, board, and other expenses…………………………….. $4,800

Psychiatric treatment ………………………………………… $5,100

Doctor Bills for ED……………………………………………. $2,200

Prescription drugs for Susan, Beth, and ED…………………... $780

Insulin for ED…………………………………………………..$540

Nonprescription drugs for Susan, Beth, and ED………………. $570

Charges at Heartland Nursing Home for ED

Medical Care……………………………………………….. $4,800

Lodging…………………………………………………….. $3,700

Meals……………………………………………………….. $2,650

Beth qualifies as Susan’s dependent and Ed would also qualify except that he receives $7,400 of taxable retirement benefits from his former employer. Beth’s psychiatrist recommended Red RiverAcademy because of its small classes and specialized psychiatric treatment program that is needed to treat Beth’s illness. Ed is a paraplegic and diabetic and Heartland offers the type of care that he requires.

Upon the recommendation of a physician, Susan has an air filtration system installed in her personal residence. She suffers from severe allergies. In connection with this equipment, Susan incurrrs and pays the following amounts during the year.

Filtration system and cost of installation……………………. $6,500

Increase in utility bills due to the system…………………….. $700

Cost of certified appraisal……………………………………. $360

The system has an estimated useful life of 10 years. The appraisal was to determine the value of Susan’s residence with and without the system. The appraisal states that the system increased the value of Susan’s residence by $2,200. Ignoring the 7.5% floor, what is the total of Susan’s expenses that qualify for the medical expense deduction?

31) In 2005 Heather sold her personal residence to Keith for $300,000. Before the sale, Heather paid the real Estate taxes of $8,030 for the calendar year. For income tax purposes, the deduction is apportioned as follows: $4,400 to Heather and $3,630 to Keith.

a) What is Keith’s basis in the residence?

b) What is Heather’s amount realized from the sale of the residence?

c) What amount of real estate taxes can Keith deduct?

d) What amount of real estate taxes can Heather deduct?