2 shela is single and works for a law firm in the

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2. Shela is single and works for a law firm. In the 2016 tax year, she made $110,000 this year in salary and $10,000 of gross interest income from a corporate bond. Her law firm withheld $16,000 of tax from her salary this year. In addition to the above, the following occurred this year: She paid $7,000 in interest on her mortgage for her primary residence. BELOW - ALL She had a rental loss (had greater expenses as a land lord than revenue) by $2,000. ABOVE - ALL She sold stock she had held for 9 months at $4,000 less than her tax basis at the time of the sale. ABOVE - $3,000 (CARRYFORWARD $1,000). Shela owned a 20% interest in a partnership during the year. The partnership had a $20,000 loss from operations during the year and made no distributions. ABOVE – 20% X $20,000 = $4,000 Shela volunteers for the Red Cross using her legal skills to do administrative work for the charity. She estimates her time volunteering is worth $5,000. NO DEDUCTION ON SERVICE FOR CHARITABLE ORGANIZATION. This time. I will accept the answers in green below as well if you had done the problem including the bullet instead. However, I will not do so in the future. Make sure you check your email/Blackboard to be on top of communications for the course. – note to self for next year – remove all the green. Use individual tax formula : Wages and interest income = $120,000 FOR AGI = - $2,000 - $3,000 - $4,000 = – $9,000 AGI = 111,000 ITEMIZED DED. POSSIBLE = – $7,000 or -9,000 USE ITEMIZED DEDUCTION EXEMPTION(S): -$4,050 TAXABLE INCOME: $99,950 or $97,950 TAX LIABILITY: $19,990 or $19,590 PREPAYMENTS: $16,000 TAX DUE (REFUND): $3,990 or $3,590 ANSWERS: A) $111,000 AGI. B) $7,000 or -9,000 OF ITEMIZED DEDUCTIONS POSSIBLE C) ITEMIZE. D) $3,990 or $3,590 TAXES DUE. 3
3. Kevin is single. In 2016, he earned $65,000 in salary this year from his employer and received $10,000 in alimony from his ex-wife. His employer withheld $9,000 in tax from his salary this year. In addition to the above, the following occurred this year: He decided he did not like his nose. So he paid $2,000 in cosmetic surgery to make it larger and more defined. NOT DEDUCTIBLE He paid $2,500 in union dues and for subscriptions to publications related to his work that were not reimbursed by his employer. BELOW – BUT ONLY OVER 2% AGI $2,500. Threshold = 2%x$75,000 = $1,500. So, get $1,000 of deduction. He paid $15,000 in rent his apartment for the year. NOT DEDUCTIBLE Use individual tax formula : GI = $75,000 FOR AGI = $0 AGI = 75,000 ITEMIZED DED. POSSIBLE = – $1,000 USE STANDARD DEDUCTION -$6,300 EXEMPTION(S): -$4,050 TAXABLE INCOME: $64,650 TAX LIABILITY: $12,930 PREPAYMENTS: $9,000 TAX DUE (REFUND): $3,930 ANSWERS:

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