1. AC256: Federal Taxation Term 1104A Seminar: Unit 7 December 4, 2011
Emil Koren, CPA, MBA

2. Welcome Introduction Read Chapter 7 View the PowerPoint Chapter 7
Post to this weeks discussion questions
Original post by Saturday and two follow up posts – all on three separate days
Finish the Tax Project (170 points)!

3. Introduction Welcome to Unit 7 of AC256
We will look at a summary of Chapter 7
We will review certain problems
We will discuss the Tax Project

4. Chapter 7 Itemized Deductions
Medical Expenses
Taxes
Interest
Charitable Contributions
Casualty and Theft Losses
Miscellaneous Itemized Deductions

5. Chapter 7 Itemized Deductions
Medical Expenses
Diagnosis, cure, treatment or prevention
Transportation – 16.5 cents per mile
Medical insurance premiums
Cost of Living in institutions
Qualified medical expenses only for amounts in excess of 7.5% of AGI

6. Chapter 7 Itemized Deductions
Taxes
State, Local and Foreign real property taxes
State, Local and Foreign personal property taxes (must be ad valorem)
State, Local and Foreign income taxes or General Sales Taxes

7. Chapter 7 Itemized Deductions
Interest
Qualified residence and home equity loan
Other interest such as credit card interest not deductible

8. Chapter 7 Itemized Deductions
Charitable Contributions
Must be Qualified Organization
Cash contribution
Property contribution Form 8283 if over $500
FMV
Limitations
50% of AGI overall limitation
30% of AGI contributions of capital gain property
20% of AGI Capital gain property contributed to private non operating foundations
Carryover into next five years

9. Chapter 7 Itemized Deductions
Casualty and Theft Losses
Personal use property
Floor of $100 per item
Subject to 10% of AGI
More on Casualty looses in Chapter 8

10. Chapter 7 Itemized Deductions
Miscellaneous Itemized Deductions
Certain employee expenses
Expenses to produce income
Cost of tax Advice
Subject to 2% of AGI floor
More information in Chapter 9

11. Problem I:7-31
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 Mariam 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 eyeglasses that will cost $300. What tax issues should Wayne and Maria consider?

12. Problem I:7-31 Medical Deduction subject to 7.5% AGI limit
Example: AGI of $50,000 X 7.5% = $3,750
Bunch medical expenses into one year – if you can

13. Problem I:7-32
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 $325,000. 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?

14. Problem I:7-32
Sec. 163(d) limits the current deduction for investment interest expense to the non-corporate taxpayer’s net investment income for the taxable year.
Deduction against ordinary income

15. Tax Project Use a Tax software package for 2010
Download required forms from
Fill out and print or scan and send to drop box
Forms that might be needed
1040
Schedule A
Schedule B
8283
Schedule M

16. Questions ?