Reference no: EM132324683

Questions -

Question 1 - Clem is married and is a skilled carpenter. Clem's wife, Wanda, works part-time as a substitute grade school teacher. Determine the amount of Clem's expenses that are deductible for AGI this year (if any) under the following independent circumstances: (Leave no answer blank. Enter zero if applicable.)

a. Clem is self-employed and this year he incurred $1,015 in expenses for tools and supplies related to his job. Since neither were covered by a qualified health plan, Wanda paid health insurance premiums of $6,300 to provide coverage for herself and Clem (not through an exchange).

b. Clem and Wanda own a garage downtown that they rent to a local business for storage. This year they incurred expenses of $2,120 in utilities and $885 in depreciation.

c. Clem paid self-employment tax of $20,900 (the employer portion is $10,450), and Wanda had $4,200 of Social Security taxes withheld from her pay.

d. Clem paid $70 to rent a safe deposit box to store his coin collection. Clem has collected coins intermittently since he was a boy, and he expects to sell his collection when he retires.

Question 2 - Smithers is a self-employed individual who earns $34,000 per year in self-employment income. Smithers pays $2,150 in annual health insurance premiums (not through an exchange) for his own medical care. In each of the following situations, determine the amount of the deductible health insurance premium for Smithers before any AGI limitation.

a. Smithers is single and the self-employment income is his only source of income.

b. Smithers is single, but besides being self-employed, Smithers is also employed part-time by SF Power Corporation. This year Smithers elected not to participate in SF's health plan.

c. Smithers is self-employed and he is also married. Smithers's spouse, Samantha, is employed full-time by SF Power Corporation and is covered by SF's health plan. Smithers is not eligible to participate in SF's health plan.

d. Smithers is self-employed and he is also married. Smithers's spouse, Samantha, is employed full-time by SF Power Corporation and is covered by SF's health plan. Smithers elected not to participate in SF's health plan.

Question 3 - Hardaway earned $147,000 of compensation this year. He also paid (or had paid for him) $6,100 of health insurance (not through an exchange).

What is Hardaway's AGI in each of the following situations? (Ignore the effects of Social Security and self-employment taxes.)

a. Hardaway is an employee and his employer paid Hardaway's $6,100 of health insurance for him as a nontaxable fringe benefit. Consequently, Hardaway received $140,900 of taxable compensation and $6,100 of nontaxable compensation.

b. Hardaway is a self-employed taxpayer, and he paid $6,100 of health insurance himself. He is not eligible to participate in an employer-sponsored plan.

Question 4 - In each of the following independent cases, indicate the amount (1) deductible for AGI, (2) deductible from AGI, and (3) deductible neither for nor from AGI before considering income limitations or the standard deduction. (Leave no answer blank. Enter zero if applicable.)

a. Ted paid $94 rent on a safety deposit box at the bank. In this box he kept the few shares of stock that he owned.

b. Tyler paid $152 for minor repairs to the fence at a rental house he owned.

c. Timmy paid $895 for health insurance premiums this year (not through an exchange and not with pre-tax dollars). Timmy is employed full-time and his employer paid the remaining premiums as a qualified fringe benefit.

d. Tess paid $1,260 of state income taxes on her consulting income.

Question 5 - In each of the following independent cases, indicate the amount (1) deductible for AGI, (2) deductible from AGI, and (3) deductible neither for nor from AGI before considering income limitations or the standard deduction. (Leave no answer blank. Enter zero if applicable.)

a. Fran spent $126 for uniforms for use on her job. Her employer reimbursed her for $28 of this amount under an accountable plan (and did not report the reimbursement as wages).

b. Timothy, a plumber employed by ACE Plumbing, spent $120 for small tools to be used on his job, but he was not reimbursed by ACE.

c. Jake is a perfume salesperson. Because of his high pay, he receives no allowance or reimbursement from his employer for advertising expenses even though his position requires him to advertise frequently. During the year, he spent $2,300 on legitimate business advertisements.

d. Trey is a self-employed, special-duty nurse. He spent $255 for uniforms.

e. Mary, a professor at a community college, spent $360 for magazine subscriptions. The magazines were helpful for her research activities, but she was not reimbursed for the expenditures.

f. Wayne lost $480 on the bets he made at the race track, but he won $136 playing slot machines.

Question 6 - Penny, a full-time biochemist, loves stock car racing. To feed her passion, she bought a used dirt-track car and has started entering some local dirt-track races. The prize money is pretty small ($1,000 for the winner), but she really is not in it for the money. Penny reported the following income and expenses from her nights at the track:

Prize money	$2,980
Expenses:
Transportation from her home to the races	1,370
Depreciation on the dirt-track car	5,140
Entry fees	3,400
Oil, gas, supplies, repairs for the dirt-track car	2,250

What are the tax effects of Penny's racing income and expenses assuming that the racing activity is a hobby for Penny?

Penny's racing income - includable or excludable (choose one)

Penny;s racing expenses - Deductible or non deductible (Choose one)

Gross income for tax - Increases or decreases (choose one)

Question 7 - Simpson, age 45, is a single individual who is employed full-time by Duff Corporation. This year Simpson reports AGI of $69,600 and has incurred the following medical expenses:

Dentist charges	$1,430
Physician charges	2,220
Optical charges	560
Cost of eyeglasses	670
Hospital charges	3,300
Prescription drugs	695
Over-the-counter drugs	800
Medical insurance premiums (not through an exchange)	945

a. Calculate the amount of medical expenses that will be included with Simpson's itemized deductions after any applicable limitations.

b. Suppose that Simpson was reimbursed for $250 of the physician's charges and $1,200 for the hospital costs. Calculate the amount of medical expenses that will be included with Simpson's itemized deductions after any applicable limitations.

Question 8 - Doctor Bones prescribed physical therapy in a pool to treat Jack's broken back. In response to this advice (and for no other reason), Jack built a swimming pool in his backyard and strictly limited use of the pool to physical therapy. Jack paid $38,400 to build the pool, but he wondered if this amount could be deducted as a medical expense. Determine if a capital expenditure such as the cost of a swimming pool qualifies for the medical expense deduction.

Multiple Choice

• The entire expenditure incurred to build the pool qualifies for medical expense deduction.
• Only part of the expenditure incurred to build the pool that does not result in any increase in the value of the residence qualifies for medical expense deduction.
• No expenditure incurred to build the pool qualifies for medical expense deduction as it permanently results in increase in value of the residence.

Question 9 - Charles has AGI of $42,500 and has made the following payments related to (1) land he inherited from his deceased aunt and (2) a personal vacation taken last year.

State inheritance tax on the land	$1,530
County real estate tax on the land	1,840
School district tax on the land	699
City special assessment on the land (replacing curbs and gutters)	987
State tax on airline tickets (paid on vacation)	312
Local hotel tax (paid during vacation)	219

Calculate the amount of taxes Charles may include in his itemized deductions for the year under the following circumstances: (Leave no answer blank. Enter zero if applicable.)

a. Suppose that Charles holds the land for appreciation.

b. Suppose that Charles holds the land for rent.

c. Suppose that Charles holds the land for appreciation and that the vacation was actually a business trip. (Apply limits if applicable)

Question 10 - Dan has AGI of $50,000 and paid the following taxes during this tax year.

State income tax withholding	$1,275
State income tax estimated payments	720
Federal income tax withholding	3,075
Social Security tax withheld from wages	1,920
State excise tax on liquor	410
Automobile license (based on the car's weight)	305
State sales tax paid	465

Calculate how much Dan can deduct for taxes as an itemized deduction this year.

Question 11 - This year, Randy paid $28,300 of interest on his residence. (Randy borrowed $486,000 to buy his residence, which is currently worth $540,000.) Randy also paid $2,600 of interest on his car loan and $4,350 of margin interest to his stockbroker (investment interest expense). How much of this interest expense can Randy deduct as an itemized deduction under the following circumstances?

a. Randy received $2,280 of interest this year and no other investment income or expenses. His AGI is $75,000.

b. Randy had no investment income this year, and his AGI is $75,000.

Question 12 - This year, Major Healy paid $37,500 of interest on a mortgage on his home (he borrowed $750,000 to buy the residence in 2015; $850,000 original purchase price and value at purchase), $5,750 of interest on a $115,000 home equity loan on his home (loan proceeds were used to buy antique cars), and $10,000 of interest on a mortgage on his vacation home (borrowed $200,000 to purchase the home in 2010; home purchased for $500,000). Major Healy's AGI is $220,000. How much interest expense can Major Healy deduct as an itemized deduction?

Question 13 - Ray Ray made the following contributions this year.

Charity	Property	Cost	FMV
Athens Academy School	Cash	$9,950	$9,950
United Way	Cash	6,450	6,450
American Heart Association	Antique painting	16,750	83,750
First Methodist Church	Coca-Cola stock	12,850	19,275

Determine the maximum amount of charitable deduction for each of these contributions ignoring the AGI ceiling on charitable contributions and assuming that the American Heart Association plans to sell the antique painting to fund its operations. Ray Ray has owned the painting and Coca-Cola stock since 1990.

Question 14 - Simon lost $7,100 gambling this year on a trip to Las Vegas. In addition, he paid $2,730 to his broker for managing his $273,000 portfolio and $500 to his accountant for preparing his tax return. In addition, Simon incurred $3,390 in transportation costs commuting back and forth from his home to his employer's office, which were not reimbursed. Calculate the amount of these expenses that Simon is able to deduct (assuming he itemizes his deductions).

Question 15 - Eva received $60,000 in compensation payments from JAZZ Corp. during 2018. Eva incurred $5,000 in business expenses relating to her work for JAZZ Corp. JAZZ did not reimburse Eva for any of these expenses. Eva is single and she deducts a standard deduction of $12,000. Based on these facts answer the following questions: Use Tax Rate Schedule for reference.

Assume that Eva is considered to be a self-employed contractor. What is her regular tax liability for the year? (Round your intermediate computations and final answer to the nearest whole dollar amount.)

Question 16 - John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2018, John worked as a computer technician at a local university earning a salary of $152,000, and Sandy worked part-time as a receptionist for a law firm earning a salary of $29,000. John also does some Web design work on the side and reported revenues of $4,000 and associated expenses of $750. The Fergusons received $800 in qualified dividends and a $200 refund of their state income taxes. The Fergusons always itemize their deductions and their itemized deductions were well over the standard deduction amount last year. The Fergusons had qualifying insurance for purposes of the Affordable Care Act (ACA). Use Exhibit 8-9, Tax Rate Schedule, Dividends and Capital Gains Tax Rates for reference.

The Fergusons reported making the following payments during the year:

• State income taxes of $4,400. Federal tax withholding of $21,000.
• Alimony payments to John's former wife of $10,000 (divorced in 2014).
• Child support payments for John's child with his former wife of $4,100.
• $12,200 of real property taxes.
• Sandy was reimbursed $600 for employee business expenses she incurred. She was required to provide documentation for her expenses to her employer.
• $3,600 to Kid Care day care center for Samantha's care while John and Sandy worked.
• $14,000 interest on their home mortgage ($400,000 acquisition debt).
• $3,000 interest on a $40,000 home-equity loan. They used the loan to pay for a family vacation and new car.
• $15,000 cash charitable contributions to qualified charities.
• Donation of used furniture to Goodwill. The furniture had a fair market value of $400 and cost $2,000.

a. What is the Fergusons' 2018 federal income taxes payable or refund, including any self-employment tax and AMT, if applicable? (Round your intermediate computations to the nearest whole dollar amount.)

b. Download the Tax Form and enter the required values in the appropriate fields.

C. Download the Tax Form and enter the required values in the appropriate fields.

Attachment:- Assignment Files.rar