Kelsey Is a Cash-Basis,calendar-Year Taxpayer

question 140

Essay

Kelsey is a cash-basis,calendar-year taxpayer.Her salary is $30,000,and she is single.She plans to purchase a residence in 2018.She anticipates her property taxes and interest will total $8,000 in 2018.Each year,Kelsey contributes approximately $1,500 to charity.Her other itemized deductions total $2,000.For purposes of this problem,assume the 2017 standard deduction amount remains in effect for 2018.
a.What will be her deductions from AGI in 2017 and 2018 if she contributes $1,500 to charity in each year?
b.What will her gross tax be in 2017 and 2018 if she contributes $3,000 to charity in 2017 but makes no contribution in 2018?
c.What will her gross tax be in 2017 and 2018 if she makes no contribution in 2017 but contributes $3,000 to charity in 2018?
d.Why does option C yield the largest deductions over time?

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