Questions -

1. Wayne and Maria file a joint tax return on which they itemize their deductions and report AGI of $50,000. During the year they incurred $1,500 of medical expenses when Maria broke her leg. Furthermore, their dentist informed them that their daughter, Alicia, needs $3,000 of orthodontic work to correct her overbite. Wayne also needs a new pair of eye glasses that will cost $300. What tax issues should Wayne and Maria consider?

2. This year, Chuck took out a loan to purchase some raw land for investment. He paid $40,000 for the land, and he expects that within 5 years the land will be worth at least $75,000. Chuck is married, and his AGI for the year is $240,000. Chuck paid $4,300 in interest on the loan this year. Chuck has $2,600 in interest income and 1,300 in dividend income for the year. He plans to itemize his deductions so he can use the interest expense to offset his investment income. What tax issues should Chuck consider?

3. Chad is divorced and has custody of Brett, his 14-year-old-son. Chad's ex wife has custody of their daughter, Sara. During the year, Chad incurs $3,000 for orthodontic work for Sara to correct a severe overbite and $2,000 in unreimbursed medical expenses associated with Brett's broken leg. Chad also pays $900 in health insurance premiums, which is withheld from his paycheck on a pre-tax basis. Both Brett and Sara are covered under Chad's medical insurance plan. In addition, Chad incurs $400 for prescription drugs and $1,000 in doctor bills for himself. Chad's AGI is $40,000. What is Chad's medical expense deduction for the year assuming that his other itemized deductions exceed the standard deduction?

4. Joyce is a single, cash-method taxpayer. On April 11, 2012, Joyce paid $120 state income taxes with her 2011 state income tax return. During 2012, Joyce had $1,600 in state income taxes withheld. On April 13, 2013, Joyce paid $200 with her 2012 state tax return. During 2013, she had $2,100 in state income taxes withheld from her paycheck. Upon filing her 2013 tax return on April 15, 2014, she received a refund of $450 for excess state income taxes withheld. Joyce had a total AGI in 2013 and 2014 of $51,000 and $53,500, respectively. In 2013, Joyce also paid $5,500 in qualified residence interest.

a. What is the amount of state income taxes Joyce may include as an itemized deduction for 2012?

b. What is the allowed itemized deduction for state income taxes for 2013?

c. What is her taxable income for 2013?

d. What is her AGI for 2014?