Question

During the current year, Robert pays the following amounts associated with his own residence: Property taxes $3,000 Mortgage interest 8,000 Repairs 1,200 Utilities 2,700 Replacement of roof 4,000 In addition, Robert paid $1,500 of property taxes on the home that is owned and used by Anne, his daughter. a. Classify the following expenses for Robert as "Deductible" or "Nondeductible". Property taxes - Robert Property taxes - Anne Mortgage interest Repairs Utilities Replacement of roof Enter Robert's total deductions without regard for any limitations. $ b. Can Anne deduct the $1,500 of property taxes? c. If deductible, are the deductions for AGI or from AGI (itemized)? d. Indicate whether each of the following is true or false regarding how the tax consequences could be improved. There is nothing that can be done to improve the tax consequences. Robert can make a cash gift to Anne, who could then pay for her expenses. If Robert can claim Anne as a dependent, he can deduct her expenses.

Answer 1

Robert can deduct his property taxes, mortgage interest, repairs, and utilities, but not the replacement of the roof. Anne cannot deduct the property taxes. The deductions for Robert are from AGI (itemized).

Step-by-step explanation:

a. Deductible expenses for Robert:
- Property taxes for Robert: Deductible
- Property taxes for Anne: Nondeductible
- Mortgage interest: Deductible
- Repairs: Deductible
- Utilities: Deductible
- Replacement of roof: Nondeductible

b. Anne cannot deduct the $1,500 of property taxes since she does not own the property.

c. The deductions for Robert are from AGI (itemized).

d. Regarding the tax consequences, the following statements are true:
- There is nothing that can be done to improve the tax consequences.
- Robert can make a cash gift to Anne, who could then pay for her expenses.
- If Robert can claim Anne as a dependent, he can deduct her expenses.

Answer 2

Robert can deduct his property taxes and mortgage interest, for a total deduction of $11,000. Anne cannot deduct the property taxes paid by Robert. Robert's deductions are itemized deductions and there are potential strategies to improve the tax consequences, such as gifting money to Anne or claiming her as a dependent.

Step-by-step explanation:

To address the student's question regarding the tax deductibility of Robert's expenses, here is a classification of the expenses:

• Property taxes - Robert: Deductible
• Property taxes - Anne: Nondeductible for Robert
• Mortgage interest: Deductible
• Repairs: Nondeductible
• Utilities: Nondeductible
• Replacement of roof: Nondeductible

Robert's total deductions would be the sum of the deductible expenses. Therefore, the total is the property taxes of $3,000 plus the mortgage interest of $8,000, which equals $11,000.

b. Anne cannot deduct the $1,500 property taxes paid by Robert, as she did not personally pay them.

c. The deductions for property taxes and mortgage interest are generally from AGI, meaning they are itemized deductions.

d. To potentially improve tax consequences:

• Robert can make a cash gift to Anne so she can pay her expenses, potentially allowing her to take the deduction if she itemizes and is not dependent on another taxpayer.
• If Robert can claim Anne as a dependent, it may affect his ability to deduct her expenses based on dependent-related tax benefits.