Reference no: EM13857984

For Stage 1, assume you are single, age 30, independent of anyone, and have no dependents, and have the following cash inflows in 2014 (you graduated college about 9 years ago): If you neglect to attach Schedule A you will fail Stage 1.

1. Pre-tax salary at General Electric (GE) of $80,000 (see below for federal income tax and state income tax withholding; assume FICA (social security) tax withholding was accurate).
2. Interest from IBM bonds $1,000 (don't bother with Sched. B).
3. Interest from municipal bonds $150,000 (these are private activity bonds, a type of muni bond we will learn more about in ch. 12 and which will be important in Stage 2).
4. Gift of cash from your grand-aunt $14,200.
5. Gift of $1,000 from your ex-spouse.

Assume for Stage 1 you had the following cash outflows in 2014.  Assume all these items have appropriate documentation to validate the deduction if the tax law indeed allows deduction for such item.  

1. paid $2,000 in charitable donations to local churches organized under US law and $1,000 to a church organized and located in Indonesia.
2. paid $2,400 to a CPA to do your 2013's income tax returns you filed in April.
3. own a condo apartment for which you paid real estate taxes of $8,000 and mortgage acquisition debt interest (not home equity loan interest, this will be important in ch. 12) was $7,000.  You also paid $2,100 of loan principal on your mortgage.
4. incurred (i.e. accrued) $26,650 of medical expenses, of which insurance paid about half.  Of the remaining amount, you paid $11,650 in 2014 and will pay the rest in 2015.
5. on December 31, lent a former college roommate $14,600.
6. during 2014, GE withheld from your salary federal income tax withholding of $2,000. You also had withholding for state/local income taxes of $7,000.  In April 2014, paid cash of $1,000 balance due to settle the state and local income taxes owed for 2013 state/city income tax filing. 
7. you paid $1,100 of state estimated income taxes (SEIT) in January 2014 for the 2013 year ( and fyi you paid $1,220 of SEIT in January 2015 for the 2014 year). [Make sure you understand this before the relevant exam(s); many students mix up DEDUCTIBILITY rules for STATE est. tax payments on federal income tax return (ch. 10) with how FEDERAL {state} est. tax payments are CREDITED on federal {state} income tax return (ch.13)]
8. paid $200 in early 2014 for a pair of skinny jeans, which were rendered unusable because you did not follow washing instructions.