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Question: In 2016, Gale and Cathy Alexander hosted


In 2016, Gale and Cathy Alexander hosted an exchange student, Axel Muller, for 9 months. Axel was part of International Student Exchange Programs (a qualified organization). Axel attended tenth grade at the local high school. Gale and Cathy did not claim Axel as a dependent but paid the following items for Axel’s well-being:

Food and clothing ……………………….…………………… $1,500
Medical care ……………………….………………………. 200
Fair market value of lodging ………………………. 2,700
Entertainment ……………………….………………………. 100
Total ……………………….……………………….…………… $4,500

Gale and Cathy have asked for your help in determining if any of the $4,500 can be deducted as a charitable contribution.

Required:
Go to the IRS website (www.irs.gov) and locate Publication 526. Write a letter to Gale and Cathy answering their question. If they can claim a deduction, be sure to include in your letter the amount that can be deducted and any substantiation requirements. (An example of a client letter is available at the website for this text located at www.cengagebrain.com.)


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> 1. Russ and Linda are married and file a joint tax return claiming their three children, ages 4, 7, and 18, as dependents. Their adjusted gross income for 2016 is $105,300. What is Russ and Linda’s total child credit for 2016? a. $600 b. $1,000 c. $2,000

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> Go to the IRS website (www.irs.gov) and print out a copy of the most recent Instructions for Form 4684, Casualties and Thefts.

> Wilbur DuVal has an apartment full of antique furniture. A fire in the apartment destroys a large part of his furnishings. The destroyed furnishings had a fair market value of $40,000, and Wilbur’s original basis in the furnishings was $33,100. He recove

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> In June of 2016, Maureen’s house is vandalized during a long-term power failure after a hurricane hit the city. The president of the United States declares Maureen’s city a disaster area as a result of the wide-scale vandalism. In which tax year may Maur

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> Richard donates publicly traded Gold Company stock with a basis of $1,000 and a fair market value of $15,000 to the college he attended, which is considered a public charity. Richard has owned the shares for 10 years. How is this contribution treated on

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> In 2016, Margaret and John Murphy (both over age 65) are married taxpayers who file a joint tax return with AGl of $26,500. During the year they incurred the following expenses: Medical insurance premiums ……&acirc

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> Show the simplified formula for calculating AMT. Do not show tax rates or an exemption amount.

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> What are the two tax rates which are used to calculate AMT, ignoring the special treatment of dividends and capital gains?

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2.99

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