Reference no: EM132460445

Problem: Austin and Anya Gould are a middle-aged couple with two children-Rusty, age 13, and Sam, age 11-whom they adopted this year. They also bought a new home in the area to give the children a yard in which to play. The Goulds have an extensive retirement portfolio invested primarily in growth-oriented mutual funds. Their annual investment income is only $500, none of which is attributable to capital gains. Austin works in the banking industry and receives an annual income of $32,500. Anya, who owns the only travel agency in town, makes about $40,000 a year.

The Goulds give extensively to charities. They also have tax deductions from their mortgage interest expense, business expenses, tax expenses, and unreimbursed medical expenses, as follows:

Health insurance (provided by Anya)

$2,200

Rusty's braces

$1,500

Mortgage interest expense

$7,200

Real estate taxes

$900

Investment and tax planning expenses

$1,450

Other medical expenses

$3,600

Charitable contributions

$3,500

Moving expenses

$3,000

Austin's unreimbursed business expenses

$2,300

Qualified adoption expenses

$6,700

State taxes withheld and owed

$4,000

Remember that Anya has some special tax expense deductions because she is self-employed. Be sure to include them when estimating their 2017 taxes.

1. How many exemptions are the Gould's allowed to claim on their tax return? What is the total amount of those exemptions?

2. What is the tax savings attributable to their exemptions?

3. How much money could Rusty earn next year and still be qualified as an exemption?

4. How did the Gould's benefit from their adoption credit? To find the most current information, go the web and look at https://www.irs.gov/taxtopics/tc607.