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Interest Income (Joint Ownership)$2,600Dividend Income$900Bert’s annual salary is $45,000 and his wife’s annual salary is $55,000.They have two small children who live at home. Also, they own an apartment house from which they derive $6,000 net rental income. Two items from their rental property confused them so they did not include them in their rental income:Security deposits received and to be used against final month’s rent$500Two tenants paid rent in advance in December 2013. The rent was due January 1, 2014$600Barbara owned stock prior to her marriage to Bert and received the following cash dividends:General Corp. nonqualified common stock dividend (U.S. corporation)$300Live Forever Life Insurance Co. (dividends on life insurance policy)$100Bert and Barbara have several sources of interest income:Interest income from savings accounts$850Interest income from State of Tennessee Highway Bonds$400
Barbara entered the local area bake-off, won first place for her cherry pie, and received a $1,000 cash prize.Bert, who is an accountant, made an arrangement with Harold the dentist. Bert would do Harold’s tax work if Harold would take care of Bert and his family’s dental work. During the year, Bert estimated that the value of his services to Harold was $500 and that Harold gave Bert and his family $600 worth of dental services. In December, Bert did a consulting assignment on a weekend and received $700. No Social Security or taxes were withheld.During the year, they had $15,000 withheld for federal taxes.During 2013, Bert and Barbara have $14,000 of itemized deductions. Compute Bert and Barbara’s net tax due, including self-employment tax. Assume dividends are taxed at ordinary rates.51. Research Problem.Robert Olsen was a very successful college basketball player. Knowing that he would be offered a multimillion dollar contract, he established a corporation assigning to it his services in professional sports in exchange for a monthly salary. Upon audit the IRS challenged this assignment of contract. Who will prevail? See C. Johnson,78 TC 882, Dec. 39,069 (1982).