For Each of the Following Situations,determine the Amount of the Allowable

question 135

Essay

For each of the following situations,determine the amount of the allowable deduction.Be sure to show any necessary calculations and provide explanations of how you determined the deductible amount.
a. Ukarie has an adjusted gross income of $\$ 40,000$ . She made the following contributions to qualified charities:

$\begin{array}{lrr}&& \text { Fair }\\ \underline { \text {Property Given }}& \underline { \text { Basis } }& \underline { \text { Market Value}}\\\text { Household Furniture } & \$ 8,000 & \$ 3,000 \\\text { Inventory from her retail store } & 6,000 & 10,000 \\\text { GE stock (purchased in 1978) } & 2,000 & 20,000\end{array}$


b. Carla purchased her home in 1994 by paying $\$ 60,000$ in cash and borrowing $\$ 140,000$ . The home is currently worth $\$ 400,000$ and her mortgage is $\$ 110,000$ . Carla is involved in a lawsuit (unrelated to any business interests) during the current year and she borrows $\$ 125,000$ using the equity in her home as collateral for the loan to pay her legal fees and court costs. She pays $\$ 9,800$ of interest on her original mortgage and $\$ 8,000$ of interest on the home equity loan during the current year.


c. Tracy is a resident of Kansas and the sole owner of The Bakery. During 2013 , Tracy makes the following payments:
$\begin{array} { l r } \text { Estimated federal income taxes } & \$ 8,000 \\ \text { Estimated state income taxes } & 3,300 \\ \text { Self-employment taxes } & 5,600 \\ \text { Sales tax from Federal Sales tax table } & 2,100 \\ \text { Property tax on personal residence } & 900 \\ \text { Tax assessment for sidewalk in front of personal residence } & 3,000 \\ 2012 \text { state tax paid in } 2013 \text { with } 2012 \text { state tax return } & 200 \end{array}$

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Definitions:

Variable Manufacturing Overhead

The portion of manufacturing overhead costs that vary directly with production volume, such as utilities and raw materials.

Work in Process Inventories

Current assets that represent partially completed goods which are still in the production process.

Standard Cost System

An accounting method that uses standard costs for materials, labor, and overhead to value inventory and cost of goods sold, facilitating variance analysis.

Cost of Goods Sold

The immediate expenses linked to the manufacturing of products a company sells, such as materials and labor.