Incomplete question. Here's the full question:
<em>Nancy paid the following taxes during the year: </em>
<em>Tax on residence (for the period from March 1 through August 31) =$5,250</em>
<em>State motor vehicle tax (based on the value of the personal use automobile) =$430</em>
<em>State sales tax =$3,500</em>
<em>State income tax =$3,050</em>
<em>Nancy sold her personal residence on June 30 of this year under an agreement in which the real estate taxes were not prorated between the buyer and the seller.</em> What amount qualifies as a deduction from AGI for Nancy? a. $9,180b. $9,130c. $7,382d. $5,382 e. None of the above
Answer:
<u>c. $7,328</u>
Explanation:
Remember, Nancy <em>transferred</em> ownership of her personal residence on June 30, but she received tax on residence for 2 extra months (July and August).
The amount that qualifies for tax deduction therefore is;
121 days (Four months of her stay) / 184 days (six months period) × $5,250
+
$430
+
$3,500] = $7,382.
She likely deducts from the state sales tax with a higher amount than from the state income tax.
