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The Deweys are expecting to save on their taxes for 2019. Not only have both incurred...

  1. The Deweys are expecting to save on their taxes for 2019. Not only have both incurred large medical expenses, but both reached age 65. During the year, they also recognized a $30,000 loss on some land they sold which was purchased as an investment several years ago. Are the Deweys under a mistaken understanding regarding their tax position? Explain.
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Answer #1

The Deweys are mistaken about their tax position.

They are expecting to qualify for two standard deductions alongside expecting deduction for medical expenses. The tax position right now as per IRS is that only option can be exercised. Both positions cannot happen under current tax structure. To claim medical deduction, the taxpayers have to itemize. If the taxpayer itemizes, they cannot claim any type of standard deduction.

Assuming that there is no capital gains and only gain losses of $ 30,000, capital losses exceed the capital gains by $ 30,000. As per IRS provisions, only $ 3000 can be deducted against the net income. The balance of $ 27,000 shall be carried forward to future years.

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