Miki, Who Is Single and 57 Years Old, Has a Qualifying

question 128

Essay

Miki, who is single and 57 years old, has a qualifying high-deductible insurance plan.She had the following transactions with her HSA during the year:​ $\begin{array}{llcc} \text { Contributions to her HSA } &\$3,500 \\ \text { Interest income earned on her HSA } &9\\ \text { Medical expenses paid from her HSA } &5,739\\ \text { HSA distribution to pay for her daughter's wedding } &7,650\\\end{array}$

a.How much may Miki claim as a deduction for adjusted gross income?
b.What is the amount that Miki must report on her federal income tax return as income from her HSA?
c.How much is subject to a penalty? What is the penalty percentage?

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Definitions:

Physical Inventory

The process of counting and verifying the physical existence of tangible goods and assets held by a business for resale or production purposes.

Dollar-value LIFO Retail Method

This method combines the Last In, First Out (LIFO) inventory method with dollar-value calculations to adjust inventory for changes in price levels, often used in retail.

Price Index

A measure that examines the weighted average of prices of a basket of consumer goods and services over a period of time.

Ending Inventory

The total value of all goods available for sale at the end of an accounting period.