Question

1.This year Randy paid $27,000 of interest (Randy borrowed $450,000 to buy his residence, and it is currently worth $500,000). Randy also paid $2,500 of interest on his car loan and $4,200 of margin interest to his stockbroker (investment interest expense). Randy received $2,200 of interest this year and no other investment income or expenses. His AGI is $75,000. How much of this interest expense can Randy deduct as an itemized deduction?

2. In addition to cash contributions to charity, Dean decided to donate shares of stock and a portrait painted during the earlier part of the last century. Dean purchased the stock and portrait many years ago as investments. Dean reported the following recipients:

                                 Charity                      Property                 Cost                   FMV
                         State University                  cash             $ 15,000             $15,000
                              Red Cross                      cash                14,500               14,500
                   State History Museum Antique painting             5,000               82,000
                      City Medical Center          Dell stock              28,000 7,000

Determine the maximum amount of charitable deduction for each of these contributions ignoring the AGI ceiling on charitable contributions.

3.Roquan is an attorney and practices as a sole proprietor. This year, Roquan had net business income of $90,000 from his law practice. Assume that Roquan pays $40,000 wages to his employees, he has $10,000 of property (unadjusted basis of equipment he purchased last year), has no capital gains or qualified dividends, and his taxable income before the deduction for qualified business income is $325,000. Calculate Roquan’s deduction for qualified business income.

Answer 1

Required 1

Home mortgage interest is allowed if the loan has been taken for principal / second home and the amount of loan is up to $750,000 secured by the home and is used to buy, build or substantially improve tax payer's home.

Interest expense for the loan taken for personal property purchased for personal use is not deductible.

Investment interest expense is limited to net investment income. Any unuesd expense may be allowed to be carried forward indefinitely.

Total interest expenses allowed as itemized deduction:

Interest on home loan	$27,000
Investment interest expense	$2,200
Total amount of itemized deduction	$29,200

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