Reference no: EM13864286

Federal Income Taxation

Paul and Dee were married on July 15, 1989 and live happily in Cape Coral, FL. They have two children, Evan and Ally. Evan is 25, works for Yelp in NYC and lives in 2-bedroom apartment with three roommates. Though his mother sends him care packages, he is generally self-sufficient. Ally is 22 and a full-time student at Florida Atlantic University. She lives in an on-campus apartment while at school, but lives with Paul and Dee when school is not in session. She works in the campus bookstore and earned $9,000 in 2015. She is saving this money for grad school, so Paul and Dee provide 100% of her support.

Paul works for Direct Buy and earned a salary of $80,000 in 2015. He received a $500 cash award for being named “Employee of the Month” in February. Dee, a talented artist, started her own business in 2014 (a sole-proprietorship) and earned $10,000 of income during the current year.

Paul and Dee have saved/invested their money over the years and earned the following investment income in 2015:

Interest from savings account $350

Interest on bonds from the City of Miami $700

Qualifying dividend from Apple $1,000

Qualifying dividend from Williams-Sonoma $1,500

Short term capital gain from the sale of Exxon-Mobil stock $200 (proceeds of $450, return of capital/basis of $250)

Paul is a partner in VLMP Partnership, along with his three older siblings. He received a statement from VLMP Partnership stating that his share of the 2015 partnership income was $4,000. In January 2015, he received a $900 distribution and later in the year he received a $1,200 distribution.

In October, Paul came to visit his favorite niece in Philadelphia. They went to Atlantic City and Paul won $1,200 on the slot machines. That same night, he lost $300 playing black jack and treated everyone to dinner at Carmine’s.

In November, Dee was selected for jury duty and earned $50 from her week of service. On the way home from the trial, Dee was in a car accident. She was lucky and walked away with just a few bruises, but her car was totaled. She had paid $10,000 for her car and received an $11,000 settlement from the insurance company (note, this settlement solely related to the car – nothing related to any physical injuries or emotional distress from the accident).

Last but not least, Paul and Dee received a state income tax refund from GA of $150 related to their 2014 tax return (FL does not have an individual income tax; however, they were required to file a return there due to Dee’s business). Paul and Dee took the standard deduction on their 2014 federal income tax return.

In 2015, their itemized deductions are $10,000. Paul had $8,000 of federal income taxes withheld from his W-2.

Calculate Paul and Dee’s taxable income.

Calculate Paul and Dee’s 2015 tax.

Will they be receiving a refund or owing money to the government? How much?