1. Matthew borrows $250,000 to invest in bonds. During 2012, his interest on the loan is $30,000. Matthew’s interest income from the bonds is $10,000. This is Matthew’s only investment income.
A. Calculate Matthew’s itemized deduction for investment interest for the year
B. Is Matthew entitled to a deduction in future years? Explain.
2. Helen paid the following amounts of interest during the 2012 tax year:
Mortgage interest on Dallas residence (loan balance $50,000) $2,025
Automobile loan interest (personal use only) $440
Mortgage interest on Vail residence (loan balance $50,000) $3,050
Visa and Mastercard Interest $165
Calculate the amount of Helen’s itemized deduction for interest (after limitations) for 2012.
3. Jerry made the following contributions during 2012:
His synagogue (by check) $680
The Democratic Party (by check) $180
The American Red Cross (by check) $150
His lodge for a holiday party $100
In addition, Jerry donated used furniture to the Salvation Army costing $2,000 with a fair market value of $400. Assuming Jerry has AGI of $45,000, has the necessary written acknowledgments, and itemizes deductions, complete the Gifts to Charity section of Schedule A to show Jerry’s deduction for 2012.
4. Richard donates publicly traded Gold Company stock with a basis of $1,000 and a fair market value of $15,000 to the college he attended, which is considered a public charity. Richard has owned the shares for 10 years. How is this contribution treated on Richard’s tax return?
