How much have you saved the raos through your treatment

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Reference no: EM13294562

Raj and Kavitha Rao are a married couple in their early 20s living in Denver. Raj earned 53,000 in 2008 from his job as a sales assistant. During the year his employer witheld $4,975 for income tax purposes. In addition the Raos received interest of $350 on common stocks. At the end of 2008 the Raos sold two stocks, A and B, A was sold for $700 and had been purchased 4 months earlier for $800. Stock B wa sold for $1m500 and had been purchased 3 years earlier for $1,000. There only child, Mashesh, age 2 received (as his sole source of income) dividends of $200 on stock of Hershey.

Although Raj is covered by his company's pension plan, he plans to contribute $5,00 to a traditional deductible IRA for 2008. Here are the amounts of money paid out during the year by the Raos:

Medical and dental expenses: $200
state and local property taxes: $831
Interest paid on home mortgage $4,148
Charitable contributions: $1,360
total: $6,539

In addition, Raj incurred some unreimbursed travel costs for an out of town business trip
airline ticket: $250
taxis: $20
Lodging: $60
Meals: $36
total: $366

Questions
1) Using the Raos' information, determine the total amount of their itemized dedutions. Assume that they'll use the filing status of married filing kointly, the standard deduction for that status is $10,900 and each exemption claimed is worth $3,500. Should they itemize or take the standard deduction? Prepare a joint tax return for Raj and Kavittha for the year ended December 31, 2008 that gives them the smalles tax liability.
2) how much have you saved the Raos through your treatment of deductions?
3) Discuss whether the Raos need to file a tax return for their son
4) Suggest some tax strategies the Raos might use to reduce their liability for next year.

Reference no: EM13294562

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