jah Week 3 Homework Assn
Week 3 Homework
Please provide your answer to each question in the space provided below.
When finished, submit to the DropBox.
In your own words, please describe what a "suspended loss" is, how it is generated, and when it becomes deductible. (5 pts)
A suspended loss is a capital loss that is suspended until future years because it exceeds passive income limitations for the current year. They are generated if a loss occurs for an activity one year, the loss exceeds passive income limitations and cannot be claimed in that year, the taxpayer continues the activity the following year(s). They are deductible when there is sufficient passive income. Chapter 8
3. Macy had a lot of medical expenses this year that were not covered by her insurance (either due to a deductible, co-insurance, or co-pay). Her un-reimbursed qualifying medical expenses total $8,356 and her AGI for 2014 is $45,000. Assuming she will itemize on her 2014 tax return, how much of her medical expenses will she be able to deduct? (5 pts) Medical Expenses | $8,356 |
Less 10% of $45,000 (AGI) | 4,500 |
Total Medical Expense Deduction | $3,856 |
4. Heather and Terry have a mortgage on their primary residence of $750,000, and a mortgage on their vacation home of $410,000. In 2014, they incurred $46,400 of mortgage interest expense. How much, if any, of that interest is deductible on Schedule A? (5 pts) The IRS has taken the position that if the initial mortgage exceeds $1,000,000, up to $100,000 of the excess will qualify as home equity interest. Rev. Rul. 2010-25
Combined Mortgage | $ 1,160,000 |
Mortgage Interest Expense | 46,400 |
Allowable Indebtedness | 1,100,000 |
Allowable Deduction | $ 44,000 |
| (1,100,000/1,160,000)*46,400 |