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Exam 10: Income, Deductions and Credits

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Question 81

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Bill paid $2,500 of medical expenses for his daughter, Marie.Marie is married to John and they file a joint return.Bill can include the $2,500 of expenses when calculating his medical expense deduction.

A) True
B) False

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Question 82

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Agnes receives a $5,000 scholarship which covers her tuition at Parochial High School.She may not exclude the $5,000 because the exclusion applies only to scholarships to attend college.

A) True
B) False

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Question 83

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Nonrefundable credits are those that reduce the taxpayer's tax liability but are not paid when the amount of the credit (or credits) exceeds the taxpayer's tax liability.

Ashley received a scholarship to be used as follows: tuition $6,000; room and board $9,000; and books and laboratory supplies $2,000.Ashley is required to include only $9,000 in her gross income.

A taxpayer's earned income credit is dependent on the number of his or her qualifying children.

Matilda works for a company with 1,000 employees.The company has a hospitalization insurance plan that covers all employees.However, the employee must pay the first $3,000 of his or her medical expenses each year.Each year, the employer contributes $1,500 to each employee's health savings account (HSA) .Matilda's employer made the contributions in 2016 and 2017, and the account earned $100 interest in 2017.At the end of 2017, Matilda withdrew $3,100 from the account to pay the deductible portion of her medical expenses for the year and other medical expenses not covered by the hospitalization insurance policy.As a result, Matilda must include in her 2017 gross income:

The earned income credit is available only if the taxpayer has at least one qualifying child in the household.

Ronaldo contributed stock worth $12,000 to the Children's Protective Agency, a qualified charity.He acquired the stock 20 months ago for $7,000.He may deduct $7,000 as a charitable contribution deduction (subject to percentage limitations).

Jacob and Emily were co-owners of a personal residence.As part of their divorce agreement, Emily paid Jacob cash for his interest in the personal residence.This cash payment results in a taxable gain to Jacob if he receives more cash than his share of the cost of the residence.