Question

QUESTION 19

1. Your friend Scotty informs you that he received a “tax-free” reimbursement in 2018 of some medical expenses he paid in 2017. Which of the following statements best explains why Scotty is not required to report the reimbursement in gross income?

   	a.	Scotty did not itemize deductions in 2017.
   	b.	Scotty did not itemize deductions in 2018.
   	c.	Scotty itemized deductions in 2017.
   	d.	Scotty itemized deductions in 2018.

QUESTION 20

1. There can be three subgroups within the long-term capital gain or loss group – 0%/15%/20%, 25%, and 28%.

   True

   False

Answer 1

19)

Answer - A.( Scotty did not itemize deductions in 2017)

Explanation:

Let's assume that Scotty didn't itemize in 2017, that means that he will be able to remove the reimbursement from gross income in 2018. Also, assuming Scotty itemized deductions in 2017, he has to report the reimbursement as gross income in 2018 to the extent he received a tax benefit from deducting medical expenses in 2017. If he itemized in 2018 there will not be an impact on the treatment of the reimbursement.

20)

Answer - True

Net long-term capital gain / loss is eligible for one or more of five alternative tax rates: 0%, 15%, 20%, 25%, and 28% with three groups as

1)The 25% rate applies to unrecaptured §1250 gain and is related to gain from disposition of §1231 assets

2)The 28% rate applies to collectibles

3)The 0%/15%/20% rates apply to any remaining net long-term capital gain