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Brendan and Theresa are married and have three children in college. Their twin daughters, Christine and Katlyn, are freshmen and attend the same university. Their son, Kevin, is a graduate student. Brendan and Theresa pay $12,280 in tuition and fees ($6,140 each) and $2,700 in textbooks ($1,380 and $1,320, respectively) for their daughters and $4,290 in tuition and fees for Kevin and $370 in textbooks. The twins' room and board is $2,500, while Kevin's room and board is $1,470. Brendan and Theresa have an adjusted gross income of $71,600.

a. Brendan and Theresa can claim $_____ as a tax credit for the higher education expenses.

Round your answers to the nearest whole dollar.

b. Assume that their adjusted gross income is $113,000, then they can claim $______ as a tax credit for the higher education expenses.

c. Assume the same facts as in part a, except that Kevin is a freshman and the twins are graduate students. Brendan and Theresa can claim $_____ as a tax credit for the higher education expenses.

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Jarrod Robel
Jarrod RobelLv2
28 Sep 2019

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1. Brendan and Theresa are married and have three children incollege. Their twin daughters, Christine and Katlyn, are freshmenand attend the same university. Their son, Kevin, is a graduatestudent. Brendan and Theresa pay $12,000 in tuition and fees($6,000 each) and $1,100 in textbooks ($500 and $600 respectively)for their daughters and $4,200 in tuition and fees for Kevin and$400 in textbooks. The twins’ room and board is $2,600, whileKevin's room and board is $1,400. Brendan and Theresa have anadjusted gross income of $77,000.

a. What amount can they claim as a tax credit for the highereducation expenses they pay?

b. Assume that their adjusted gross income is $116,000. Whatamount can they claim as a tax credit for the higher educationexpenses they pay?

c. Assume the same facts as in part a, except that Kevin is afreshman and the twins are graduate students. What amount canBrendan and Theresa claim as a tax credit for the higher educationexpenses they pay?

2. Determine whether each of the following taxpayers must file areturn in 2016:

a. Felicia is a dependent who has wages of $6,100 and interestincome of $225.

b. Jason is a dependent who has interest income of $800.

c. Jerry is self-employed. His gross business receipts are$43,000, and business expenses are $40,300. His only other incomeis $1,200 in interest from municipal bonds

3. Martina is single and has two children in college. Matthew isa sophomore and Christine is in her fifth year of college. Martinapays $3,600 in tuition and fees for Matthew, $700 for textbooks,and $2,000 for his room and board. Christine's tuition and fees are$4,800, her textbooks are $550, and her room and board expenses are$1,800. Martina's adjusted gross income is $55,000.

a. What amount can Martina claim as a tax credit for the highereducation expenses she pays?

b. Assume that Martina's adjusted gross income is $83,000. Whatamount can she claim as a tax credit for the higher educationexpenses she pays?

Please complete Schedule C for Tax Accounting

All info is included:

Mark Moore, 48, Social Security Number 123-45-6789, is aself-employed architect. His gross income is $201,000. In 2014, hepaid estimated taxes of $33,000. His wife, Lori, 45, SocialSecurity Number 123-48-9012, is an elementary school teacher. HerW-2 earnings were $46,000. She had $6,050 withheld in federaltax.

Mark and Lori's son, Brian, 23, Social Security number,456-23-4556, a full-time college student, graduated from college inMay of 2014 but still lives at home and his parents pay his livingexpenses. His W-2 earnings were $25,000; he had $4,000 withheld infederal taxes. Brian is saving his earnings for graduate schoolwhich he hopes to attend in a couple of years.

Their daughter, Sara, 9, Social Security Number 245-78-8978, isin elementary school and has income of $9,500 from a part timemodeling job. All her earnings are deposited in an investmentaccount for her future.

Lori's mother, Alice Jones, 77, Social Security Number345-67-8910, has lived with the family since November 2013, exceptfor four months in 2014, when she was convalescing in a nursinghome from a hip fracture. She receives $12,000 from SocialSecurity. Alice also receives a taxable pension, reported as $8,000on her 1099-R.

Mark has a few business expenses. They include:

$5,821 on office supplies.

1,350 for advertising.

$6,700 on blueprints for jobs.

$350 for printing.

$1,100 on permits for jobs.

$1,423 for home show fees.

$10,000 for a part-time employee.

Total Social Security taxes relating to this employee of $1,240,and Medicare taxes of $290 (includes both the employer and employeeportions). Federal income taxes (withholding) were also paid, aswell as $56 in federal unemployment taxes.

$349 for professional journals related to architecture.

$2,400 (a $200 monthly flat rate) for his cell phone, which isused 85% for business.

$543 for long distance business phone calls placed on his homephone.

Mark belongs to several local Chambers of Commerce. During 2014,he paid $360 in dues.

$2,348 for various tickets to football games that he took hisclients to.

Mark paid $15,000 in country club dues for the 2014 tax year.The entire family uses the club for swimming, sports activities,and dining. Mark used the club to entertain several of his clientsduring the year. His use of the club was 18% of the total use ofthe club. He spent $3,320 for business meals at the country cluband $4,950 for golf fees when he and his clients played golf at theclub. Each time he entertained clients, business was discussedbefore, during and/or after golfing or meals at the club.

Mark also incurred the following business expenses to attendseveral architecture conferences during the tax year. Allconferences were in the United States.

Airfare $2,650

Hotel 1,229

Meals 2,142

Transportation 220

Conferencefees 1,190

He uses one room of the house as an office (1/16 of the totalsquare footage of the house). The house was purchased on August 5,2011 for $401,000, of which $75,000 was allocated to the purchaseprice of the lot. The home is 2,800 square feet. Lori also oftenuses this room to work on her craft projects. The room is also usedfor out of town guests who visit. Some expenses related to thishome office include

Utilities (total for the house) 2,590

Insurance (total for thehouse) 1,450

Painting of the room 600

In June of 2014 Mark purchased the following assets for use inhis business. (All other assets he uses in his business werepurchased a number of years ago and were either expensed or havebeen completely depreciated before this year.) All the recentlypurchased assets are used 100% for business. Because he anticipateshis income increasing substantially next year, he does not wish toexpense any of the purchases nor claim any additional first yeardepreciation he might be eligible for.

UsedDesk $3,750

FileCabinet 2,450

Computer 5,850

Bookcases 3,725

Printer/Copier 2,025

Mark has carefully kept a log of his 12,900 miles spent drivingto clients and returning to his home office each day. He visitsonly one client a day. He drives a 2012 Volkswagen Passat, whichthey paid off in 2013. He purchased the car for $28,700. He kept nogas, maintenance or any other auto-expense receipts.

Mark’s employer identification number for his business is38-6543210.

Lori completed her Masters degree in elementary education in2014, having decided that the advanced degree would improve herwork skills and increase her salary and marketability. In 2014, shefully paid tuition of $7,500.

Lori also subscribes to a number of teaching journals. She feelsthey help her improve her skills at work and make her a betteremployee. She spent $250 on these journals and she also spent $350on supplies for her classroom.

Lori, who also likes to make and sell crafts, had gross receiptsof $7,320 from this activity. The materials for the crafts she soldcost her $4,315; other miscellaneous expenses (marketing and craftshow fees and postage) totaled $1,805. This is the first year thatLori has attempted to sell any of her crafts. Since she feels shewas successful, she plans to continue this activity into the futureas a part time business.

In 2014, Mark and Lori took out a home equity loan of $75,000.Of that sum, they spent $26,000 on a new Ford Fusion which Loridrives and for which they also paid $1,560 in sales tax. They used$24,000 to pay the nursing-home bill that Alice couldn't payherself. They paid $2,550 in interest on the home equity loan.

Other information:

Mark and Lori earned taxable interest of $2,002 from FirstNational Bank.

Lori had $830 in interest from an interest bearing checkingaccount at Chase Bank.

Mark had $150 in interest from an interest bearing checkingaccount at Second National Bank.

Mark received $6,740 in interest from U.S. Treasury Bonds.

Lori received $4,780 in interest from State of Kentuckybonds.

Lori received $2,402 in ordinary (and qualifying) dividends fromGeneral Electric stock she held individually

Brian received $212 in interest from an interest bearingchecking account at PDQ Bank.

Sara received $1,360 in ordinary (and qualifying dividends) fromher investment account at TD Ameritrade. These dividends werereinvested in the account.

Mark received $2,440 in ordinary (and non-qualifying) dividendsfrom Intel stock he held individually.

They paid $9,500 in real estate taxes and $15,100 in interest ontheir original mortgage. (Mortgage amount is less than$1,000,000)

They made monetary charitable contributions of $12,530 and havereceipts. Mark also contributed design services that were auctionedoff by the Alachua Animal Shelter (a qualified charitableorganization) on August 15, 2014. He normally charges $500 for suchservices and the winning bid at the auction was $300. The Mooresalso donated old clothes to the Salvation Army, Gainesville,Florida. The clothes’ thrift shop value was $350 and the Moorespurchased them at various times for $1,000.

Mark and Lori and their children had $3,200 of medical expensesand $5,400 of dental expenses that were not covered by insurance(The family’s insurance is provided by Lori’s employer as a part ofher fringe benefit package. The value of the insurance premiums for2014 is $14,500) The Moores also spent $275 on over the counterdrugs during the year. Lori spent $650 on eyeglasses and exams thatweren’t covered by insurance.

The Moore family lives in Gainesville, Florida at 3908143rd Street. They pay no state or local incometaxes.

The Moore’s had a garage sale this year and made $5,900. Theysold old clothes, old children’s toys, used furniture, and otherused household goods.

Mark received a $22,000 gift from his parents during theyear.

During 2014, Mark had the following stock sales:

Date Purchased

Basis

Date Sold

Amount Realized

Amazon.com

11/1/2013

$12,959

10/23/2014

$17,770

Barnes & Noble

7/14/2007

$18,665

3/11/2014

$10,155

Pepsico

5/6/1996

$6,263

9/19/2014

$6,541

Ford

4/12/2014

$12,540

7/10/2014

$10,540

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