31a) Marcus (ssn XXXXXXXXXXand Debra Cross own three homes. Information regarding the amount of acquisition indebtedness, as well as interest and taxes paid on each home during the year is as follows....

Itemized deductions from adjusted gross income are allowed for specific activities, catastrophic losses, or other taxes paid under the federal individual income tax system (Internal Revenue Code, Section 63). Taxpayers compute their total itemized deduct
Itemized deductions from adjusted gross income are allowed for specific activities, catastrophic losses, or other taxes paid under the federal individual income tax system (Internal Revenue Code, Section 63). Taxpayers compute their total itemized deductions, compare this total to the standard deduction allowed for their filing status, and subtract the greater amount from adjusted gross income. While the standard deduction simply provides a threshold for taxation, itemized deductions are targeted at individual circumstances or specific policies (Goode 1976: 147). Itemized deductions have been allowed under the federal income tax law for many years. However, they have been altered over time; some have been disallowed, some have been added, the computations have changed, and so forth. Taxpayers with income over a threshold amount are subject to a limitation on their total itemized deductions. In 1997, the threshold was $121,200 ($60,600 for ma
ied filing separately). For taxpayers with adjusted gross income over the threshold, allowable itemized deductions (other than medical, investment interest, casualty, theft, or wagering losses) are reduced by 3 percent of the excess, to a maximum reduction of 80 percent of total allowable deductions (excluding medical, investment interest, casualty, theft, or wagering losses) (Commerce Clearing House 1996: 281). Taxpayers must use tax form 1040 if they itemize their deductions. In 1993, approximately 28 percent of all federal individual income tax returns filed used itemized rather than standard deductions. Of the 43 states and the District of Columbia that have an income tax, 38 allow some itemized deductions in the calculation of taxable income (Advisory Commission on Intergovernmental Relations 1994: 68�69). The majority of these states have adopted most of the same itemized deductions that are allowed by the federal government. The purpose of itemized deductions is fourfold: to ease the burden of catastrophic expenditures that affect a taxpaying unit�s ability to pay tax, to encourage certain types of activities such as home ownership and charitable contributions, to ease the burden of taxes paid to state and local governments, and to allow taxpayers to deduct the cost of legitimate business expenses (Pechman 1987: 92�97). Under cu
ent law, there are seven main classes of itemized deductions. Medical and dental expenses are justified on the grounds that catastrophic medical expenses alter a taxpayer�s ability to pay taxes...