Aaron, Age 45, Had AGI of $70,000 for 2018

question 1

Essay

Aaron, age 45, had AGI of $70,000 for 2018. He was injured in a skiing accident and paid $3,600 for hospital expenses and $2,400 for doctor bills. Aaron also incurred medical expenses of $1,200 for his child, who lives with his former wife and is claimed as a dependent by her. In 2019, Aaron was reimbursed $1,300 by his insurance company for the medical expenses attributable to the skiing accident.
a. Compute Aaron's deduction for medical expenses in 2018.
b. Assume that Aaron would have elected to itemize his deductions even if he had no medical expenses in 2018. How much, if any, of the $1,300 reimbursement must be included in gross income in 2019?
c. Assume that Aaron's other itemized deductions in 2018 were $16,900 and that he filed as a head of household. How much of the $1,300 reimbursement must he include in gross income in 2019?

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Definitions:

Eurobond

International bonds issued in multiple countries but denominated in a single currency (usually the issuer’s currency).

Foreign Bond

A bond issued in a country by a foreign entity, denominated in the issuing country's currency.

Absolute Purchasing Power Parity

A theory in economics that suggests that in the absence of transaction costs and official barriers, the price of identical products sold in different countries should be the same when translated to a common currency.

Trade Barriers

Measures implemented by governments to restrict international trade, often aimed at protecting domestic industries.