Hall, a divorced person and custodian of her 12-year-old child, filed her 2021 federal income tax return as head of a household.
She submitted the following information to the CPA who prepared her 2021 return: The divorce agreement, executed in 2016, provides for Hall to receive $3,000 per month, of which $600 is designated as child support. After the child reaches 18, the monthly payments are to be reduced to $2,400 and are to continue until remarriage or death. However, for the year 2021, Hall received a total of only $5,000 from her former husband. Hall paid an attorney $2,000 in 2021 in a suit to collect the alimony owed. In June 2017, Hall's mother gifted her 100 shares of a listed stock. The donor's basis for this stock, which she bought in 1985, was $4,000, and market value on the date of the gift was $3,000. Hall sold her stock in July 2017 for $3,500. The donor paid no gift tax.During 2017, Hall spent a total of $1,000 for state lottery tickets. Her lottery winnings in 2017 totaled $200.Hall earned a salary of $25,000 in 2017. Hall was not covered by any type of retirement plan, but contributed $2,000 to an IRA in 2017.In 2017, Hall sold an antique that she bought in 1995 to display in her home. Hall paid $800 for the antique and sold it for $1,400, using the proceeds to pay a court‐ordered judgment.Hall paid the following expenses in 2017 pertaining to the home that she owns: realty taxes, $3,400; mortgage interest, $7,000; casualty insurance, $490; assessment by city for construction of a sewer system, $910; interest of $1,000 on a personal, unsecured bank loan, the proceeds of which were used for home improvements. Hall does not rent out any portion of the home. Hall's $2,000 contribution to an IRA should be treated as
a. A deduction from adjusted gross income not subject to the 2% of adjusted gross income floor.
b. A deduction from adjusted gross income subject to the 2% of adjusted gross income floor.
c. An adjustment to income in arriving at adjusted gross income.
d. Non-deductible, with the interest income on the $2,000 to be deferred until withdrawal.
