ACCT4311 - TAX

HOMEWORK - CHAPTER 6 

36. Clem is married and is a skilled carpenter. Clem’s wife, Wanda, works part-time as a substitute grade school teacher. Determine the amount of Clem’s expenses that are deductible for AGI this year (if any) under the following independent circumstances: 

a. Clem is self-employed and this year he incurred $525 in expenses for tools and supplies related to his job. Since neither were covered by a qualified health plan, Wanda paid health insurance premiums of $3,600 to provide coverage for herself and Clem (not through an exchange). 

$4,125 – The tools and supplies and the health insurance are deductible for AGI.

b. Clem and Wanda own a garage downtown that they rent to a local business for storage. This year they incurred expenses of $1,250 in utilities and $780 of depreciation. 

$2,030 – The utilities and depreciation are deductible for AGI (rental activity).

c. Clem paid self-employment tax of $15,300 (the employer portion is $7,650) and Wanda had $3,000 of Social Security taxes withheld from her pay. 

$7,650 –The employer portion of the self-employment tax is deductible for AGI but the Social Security tax is not deductible.

d. Clem paid $45 to rent a safe deposit box to store his coin collection. Clem has collected coins intermittently since he was a boy and he expects to sell his collection when he retires.
$0 – The safe deposit fee is an itemized deduction (it appears that Clem is investing in rare coins rather than a dealer in coins – a business).