One class of deductions is variously described as deductions for AGI, above-the-line deductions, and page 1 deductions. Explain the meaning of these designations.
7. LO.1, 8, 9 In late 2013, the Polks come to you for tax advice. They are considering selling some stock investments for a loss and making a contribution to a traditional IRA.
In reviewing their situation, you note that they have large medical expenses and a casualty loss, with neither being covered by insurance. What advice would you give to the Polks?
8. LO.2 In choosing between the standard deduction and itemizing deductions from AGI, what effect, if any, does each of the following variables have?
a. The age of the taxpayer(s).
b. The health (i.e., physical condition) of the taxpayer(s).
c. Whether the taxpayer(s) rent or own their personal residence.
d. Taxpayer’s filing status (e.g., single; married, filing jointly).
e. Whether married taxpayers decide to file separate returns.
f. The taxpayer’s uninsured personal residence that recently was destroyed by fire.
g. The number of personal and dependency exemptions the taxpayer(s) can claim.
9. LO.2 In connection with the standard deduction, comment on the following.
a. Percentage of taxpayers who chose the standard deduction rather than itemize.
b. Status of a taxpayer who dies before year-end.
c. Types of standard deductions available.
d. Special limitations on standard deduction for dependents.
e. When not available.
10. LO.2, 3, 5 David is age 78, is a widower, and is being claimed as a dependent by his son. How does this situation affect the following?
a. David’s own individual filing requirement.
b. David’s personal exemption.
c. The standard deduction allowed to David.
d. The availability of any additional standard deduction.
11. LO.2 Sam and Abby are dependents of their parents, and each earns gross income of $2,100 for the year. Sam’s standard deduction for the year is $1,000, while Abby’s is $2,450. As their income is the same, what causes the difference in the amount of the standard deduction?
12. LO.4 Kirby, age 18, lives with her parents in a household maintained by them. As an actress, she earns $600,000 during the year, which, after taxes, is placed in a trust for her.
Can Kirby be claimed as a dependent by her parents? Explain.