Download AC113 Accounting for Non-Accounting Majors Seminar: Unit 1

AC256: Federal Taxation
Term 1104A
Seminar: Unit 7
December 4, 2011
Emil Koren, CPA, MBA
Welcome
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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)!
Introduction
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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
Chapter 7
Itemized Deductions
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Medical Expenses
Taxes
Interest
Charitable Contributions
Casualty and Theft Losses
Miscellaneous Itemized Deductions
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
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
Chapter 7
Itemized Deductions
Interest
• Qualified residence and home equity loan
• Other interest such as credit card interest not
deductible
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
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
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
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?
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
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?
Problem I:7-32
• Sec. 163(d) limits the current deduction for
investment interest expense to the noncorporate taxpayer’s net investment income
for the taxable year.
• Deduction against ordinary income
Tax Project
• Use a Tax software package for 2010
• Download required forms from www.irs.gov
• Fill out and print or scan and send to drop box
Forms that might be needed
1040
Schedule A
Schedule B
8283
Schedule M
Questions
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