Question

Answer the following questions:

1. Explain what itemized deductions are dependent upon adjusted gross income and what are the relationships? Identify any, if at all, of the categories of itemized deductions that would be available as deductions toward adjusted gross income? How does the tax benefit rule affect a taxpayer's requirement to report state and local tax refunds from prior years?

2. Sam Simpson transferred stock, real estate, and his principal residence to his former wife, Shirley, under the terms of the property settlement agreement. In exchange, Shirley agreed to pay Sam $ 250,000 down and another $ 750,000 at 10 percent per year for 10 years. Can Shirley deduct any of the interest she expects to pay over the next 10 years? Explain

3. What is ordinary income property? Does this contribution deduction limitation apply to all taxpayers? Explain.

4. Sam Simpson transferred stock, real estate, and his principal residence to his former wife, Shirley, under the terms of the property settlement agreement. In exchange, Shirley agreed to pay Sam $ 250,000 down and another $ 750,000 at 10 percent per year for 10 years. Can Shirley deduct any of the interest she expects to pay over the next 10 years? Explain.

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(1). US taxpayers are allowed following deductions from gross income
o A special deduction called personal exemption. This is allowed only to those taxpayers who have dependents. It is a fixed amount and an additional amount for each child or other dependents to which taxpayer supports.
o A flat amount as a standard deduction is allowed to US taxpayers.
o The amount of interest and property taxes paid on the principal and second homes is deductible.
o Local and state income taxes are deductible
o Donations and contributions to charitable organizations are deductible up to the limit of 50% of the gross income.
o Medical expenses in excess of 7.5% are deductible
o Other income producing expense in excess of 2% of gross income are deductible....

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