[Anonymous]

I need further explanation on something on individual taxes, hope someone can help me out (these are right off the Wiley book):

Question 1: During 2009 Mr and Mrs Benson provided substantially all the support, in their own home, for their son John (26) and Mrs Bensons cousin Nancy (17). John had $3900 of income in 2009, and Nancy’s income was $2500. The Bensons paid the following medical expenses during the year

Medicines and drugs:

For themselves: 400

For John: 500

For Nancy: 100

Doctors:

For themselves 600

For John 900

For Nancy 200

What is the total amount of medical expenses (before application of any limitation rules) that would enter income the calculation of itemized deductions on the Bensons 2009 tax return?

I used the CRAIS test provided by Phil Yaeger to determine whose medical expenses could be itemized, aside from Mr and Mrs. Bensons and determined that Nancy’s but not John’s (income greater than 3650) can be itemized, totalling $1300. However the solution provided $2700 as the answer with the following explanation:

“Deductible medical expenses include those incurred by a taxpayer, taxpayer’s spouse, dependents of the taxpayer or any person for whom the taxpayer can claim a dependency exemption except that the person had gross income of 3650 or more or filed a joint return. Thus the Bensons may deduct medical expenses incurred for themselves, for John (i.e. no dependency exemption only because his gross income is 3650 or more) and for Nancy (i.e. a dependent of Bensons)”

The solution is just not making sense to me since it states that there is no dependency exemption for John because of his income yet his medical expenses are being included in the answer? I feel like I’m missing something or misunderstanding. Hope you can help. Thanks Jeff!

CRAIS

An individual must satisfy 5 additional tests to be classified as a qualifying relative. QUALIFYING RELATIVE: CRAIS

C: Citizen or relative of US,CA,Mex

R. Relationship test (relative greater than cousin, if not relative have to live w them for entire year)

A: Absence of joint return unless filed solely for refund of tax withheld

I: Income test: gross taxable income m.b. lower than standard exemption of $3650

S: Support: taxpayer has to furnish GREATER than 50% of support.

a. Includes food, clothing, FV of lodging, medical, education, recreation certain capital expenses

b. Excludes LIFE insurance premiums, funeral expenses, nontaxable scholarships

[mandy8041]

For medical expenses, the deduction may be taken for any person who was the taxpayers dependent. The exception is that the dependent is determined without regard to whether the depended claims the exemption, files a joint return or has gross income in excess of the exemption amount.

FAR- 75
REG- 82
BEC- 73, 79!! Its over. Am I dreaming?
AUD- 74, 74, 88

[gms361]

Here is my understanding. Only the gross income and joint return tests do not apply to determining if someone is a dependent for this purpose. Thus, since Jon doesn't qualify as a dependent due to the age limit, they couldn't claim him or his expenses. Then, Nancy is a cousin and I understand that cousins are one of the few relationships that are not considered a qualifying relative (per CPAexcel study materials). Therefore, they couldn't claim her expenses either.

So I think the answer is incorrect. I think they could only claim their own medical expenses.

AUD - 83
FAR - 78
BEC - 76
REG - 86 PTL!!!!!

Used CPAExcel & Wiley testbank (awesome by the way)

[PistolPete]

Dependency qualifications don’t have to be met for qualifying medical expenses. If the taxpayer provides the support, the deduction can be taken regardless of income or age.

FAR - 68, 79
AUD - 82
REG - 71, 71, 80
BEC - 76

CMA
Part 1: October 2013
Part 2: January 2014

[Anonymous]

PistolPete is correct. The deduction for medical expenses ignores income of a qualifying relative.

[Anonymous]

Don't stress over this, maybe worth one point on the exam. Mandy and Pistol are correct though

[Author]

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