1. Julie, who is single, has the following items for 2014:
- Salary - $100,000.
- A hurricane completely destroyed Julie's duplex during the current year. Julie lived in one-half of the duplex and rented out the other half. Julie paid $400,000 for the duplex and has taken $80,000 of cost recovery on the rental portion of the duplex. The duplex was worth $420,000 at the time of the destruction. Julie's insurance policy paid her 90% of the fair market value of the duplex.
- Household items destroyed in the hurricane had a basis of $15,000 and a fair market value of %8,500. There was no insurance recovery on the household items.
- Julie purchased a painting three years ago for $4,000. At the time of the hurricane, the painting was worth $10,000. Julie purchased the painting as an investment with the intent that she would sell it when its value exceeded $12,000. There was no insurance recovery on the painting.
- Home mortgage interest - #10,000.
Determine the amount of Julie's taxable income for 2014.
2. While Susan was on vacation during the current year, someone broke into her home and stole the following items:
- A computer used 60% in connection with Susan's rental property and 40% for her personal use. The cost of the computer was $8,000. Depreciation of $1,000 had been taken on the computer and it had a fair market value of $4,000 at the time of the theft.
- A painting, which Susan purchased as an investment for $10,000, had a fair market value of $17,000.
- Silverware purchased for $3,000 had a fair market value of $5,000.
- Cash of $30,000.
Susan's adjusted gross income, before considering any of the above items, is $60,000. Determine the total amount of Susan's itemized deductions resulting from theft.
3. Clint uses his automobile for both business and personal use and claims the automatic mileage rate for all purposes. During 2014, his mileage was as follows:
Miles Driven
Personal 4,000
Business 7,000
Qualifying moving expense 4,000
Medical 2,000
Charitable 2,000
Qualifying education (MBA program) 400
How much can Clint claim for mileage?
4. Rocky has a full-time job as an electrical engineer for the city utility. In his spare time, Rocky repairs TV sets in the basement of his personal residence. Most of his business comes from friends and referrals from former customers, although occasionally he runs an ad in the local suburbia newspaper. Typically, the sets are dropped off at Rocky's house and later picked up by the owner when notified that the repairs have been made.
The floor space of Rocky's residence is 2,500 square feet, and he estimates that 20% of this is devoted exclusively to the repair business. Gross income from the business is $13,000, while expenses (other than home office) are $5,000. Expenses relating to the residence are as follows:
Real property taxes $4,500
Interest on home mortgage 8,000
Operating expenses of residence 3,000
Depreciation (based on 20% business use) 1,000
What is Rocky's net income from the repair business?
5. In 2014, Linda sold her personal residence to Tom for $300,000. Before the sale, Linda paid the real estate taxes of $8,030 for the calendar year. For income tax purpose, the deduction is apportioned as follows: $4,400 to Linda and $3,630 to Tom.
a. What is Tom's basis in the residence?
b. What is Linda's amount realized from the sale of the residence?
c. What amount of real estate taxes can Tom deduct?
d. What amount of real estate taxes can Linda deduct?
6. For calendar year 2014, Jon and Betty Hansen file a joint return reflecting AGI of $280,000. Their itemized deductions are as follows:
Medical expenses before AGI floor
Casualty loss (not covered by insurance) before statutory floors
Interest on home mortgage
Interest on credit cards
Property taxes on home
Charitable contributions
State income tax
Tax return preparation fees
What is the amount of itemized deductions the Hansen's may claim?