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State and local income taxes withheld from a cash-basis taxpayer are deductible in the year
The deduction for interest expense on investment indebtedness is limited to net investment
income (investment income less investment expenses).
Which expense, both incurred and paid in the same year, can be claimed as an itemized
deduction subject to the two percent-of-adjusted-gross-income floor?
o Employee's unreimbursed business car expense.
Interest paid on a debt secured by a home mortgage is classified as deductible qualified
residence interest.
Mortgages of up to $1,000,000 to buy, build, or substantially improve a home allow for the full
deduction of interest. Interest on auto loans (consumer interest) is not deductible.
For Keogh plans, earned income is defined as net self-employment earnings reduced by the
amount of the allowable Keogh deduction and ½ the self-employment tax.
There is no itemized deduction for temporary living expenses, and the direct moving
expenses (such as the costs to move the goods and the costs to move the taxpayer's family
from the old to the new location) are deductible before adjusted gross income, not as an
itemized deduction
The adjustment for education loan interest (an above-the-line deduction to arrive at AGI) is
limited to the amount paid or $2,500 (whichever is lower), and all qualified education loan
interest is allowed as part of the adjustment. The adjustment is phased-out for single
taxpayers with modified AGI between $65,000 and $80,000 (2014) and married filing jointly
between $130,000 and $160,000 (2014).
For IRAs, the adjustment is allowed for a year ONLY if the contribution is made by the due
date of the tax return for individuals (April 15). The due date for filing the tax return under a
filing extension is NOT allowed (i.e., filing extensions are NOT considered).
Employee business expenses are a miscellaneous itemized deduction subject to the 2% of
adjusted gross income (AGI) floor.
Qualified mortgage interest paid is deductible on Schedule A as an itemized deduction.
Provided the taxes due after withholdings were not over $1,000, there is no penalty for
underpayment of estimated taxes. Note that there would be a failure to pay penalty on the
$200 that was not paid until April 30, but this is a separate penalty.
his position passes the realistic probability standard. Given the facts, the position meets the
more-likely-than-not standard; that is, a greater than 50% likelihood that the position, if it is
challenged, will be upheld on the position’s merits. Therefore, it is proper for the tax preparer
to recommend the position to the client. However, the tax preparer is required to inform the
client of all possible penalties that the IRS could collect if the IRS disallows the position and,
if upon subsequent appeal by the taxpayer the courts conclude that the taxpayer has not met
the more-likely-than-not standard.
If the determination on the prior return was caused by lack of supporting data, Ivan can take
a different position on the current return if he has better supporting data for the new return.