Question

7-56 Classification and Deductibility: In each of the following independent situations indicate for the current taxable year the amounts deductible for AGI, from AGI. or not deductible at all. Unless otherwise stated, assume all taxpayers use the cash basis method of accounting and report using the calendar year. a. M spent $1,000 on a life insurance policy covering her own life. b. G is an author of novels. His wife attempted to have him declared insane and have him committed. Fearing the effect that his wife's charges might have on him and his book sales, G paid $11,000 in legal fees, resulting in a success- ful defense. c. Taxpayer, a plumber employed by XYZ Corporation, paid union dues of $100. Q Corporation paid T, its president and majority shareholder, a salary of $100,000. Employees in comparable positions earn salaries of $70,000. L operates a furniture business as a sole proprietorship. She rents a warehouse (on a month-to-month basis) used for storing items sold in her store. In late December, L paid $2,000 for rental of the warehouse for the month of January, f. M is a self-employed security officer. He paid $100 for uniforms and $25 for having them cleaned. N is a security officer employed by the owner of a large apartment complex. He pays $350 for uniforms. In addition, he paid $95 for having them cleaned. His employer reimbursed him $175 of the cost of the uniforms (included in his income on Form W-2). h. K owns a duplex as an investment. During the year, she paid $75 for advertise- ments seeking tenants. She was unable to rent the duplex, and thus no income was earned this year. P paid $200 for subscriptions to technical journals to be used in his employ- ment activities. Although P was fully reimbursed by his employer, his employ- er did not report the reimbursement in P's income. ci

Answer 1

Answers to the questions are as follows:

a. decuctible from AGI

b. deductible for AGI

c. deductible for AGI

d. deductible for AGI

e. deductible for AGI

f. deductible for AGI

g. Not deductible at all

h. Not deductible at all

i. decuctible from AGI