Accounting-On January 1 of the current year, Scott borrows $80,000

1. On January 1 of the current year, Scott borrows $80,000, pledging the assets of his business as collateral. He immediately deposits the money in an interest-bearing checking account. Scott already had $20,000 in this account. On April 1, Scott invests $75,000 in a limited real estate partnership. On July 1, he buys a new ski boat for $12,000. On August 1, he makes a $10,000 capital contribution to his unincorporated business. Scott repays $50,000 of the loan on November 30 of the current year. Classify Scott’s interest expense for the year.2. During 2013, Doug incurs the following deductible expenses: $2,300 in state income taxes, $3,000 in local property taxes, $800 in medical expenses, and $2,000 in charitable contributions. Doug is 33, single, has no dependents, and has $35,000 AGI for the year. What is the amount of Doug’s taxable income?3. During 2013, James, a single cash method taxpayer incurred the following expenditures:Qualified medical expenses $ 8,000Investment interest expense 16,000Other investment activity expenses 15,000Qualified residence interest 12,000Interest on loan on personal auto 2,000Charitable contributions 3,000State income tax paid 7,000State sales tax paid 4,500Property taxes 4,000Tax return preparation & consulting fees 5,000James’ income consisted of the following items:Salary $70,000Interest Income 20,000Long-term capital gains 23,000Long-term capital losses (15,000)a. Compute James’ taxable income for the year (assuming that he makes an election to have the net capital gain taxed at the regular tax rates). Also assume that James is 67 years old. Thus, his medical expense deduction is subject to the 7.5% rather than the 10% limit.b. What is James’ investment interest carryover (if any)?

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