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ACCT 3221 : TAX FINAL

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azuremammoth471
15 Mar 2019
School
LSU
Department
Accounting
Course
ACCT 3221
Professor
All

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Document Summary

Tax formula (1040: income, (exclusions, gifts: not employee gifts or income earned on any gift. Interest of state and local (municipal bonds: gross income, alimony: front-loading: alimony recapture for payer, annuities (income element): exclusion ratio= investment in contract/ expected return under contract; once recovered payments are fully taxable. Ni from self employment: contribution to pension, profit sharing, annuity plans, iras, etc, penalty on premature withdrawal from savings, moving expenses, qualified tuition expenses: also a tax credit. Interest on student loans: room and board included: up to teaching supplies: elementary and secondary teachers (k-12, business losses: no limitations, capital loss: up to ,000/ yr, agi, (deductions from agi) million; home equity only <100,000; investment interest limited to investment income: charitable contributions: qualified charity; noncash- Gains: less: tax credits, child tax credit: ,000/dependent child under age 17, tax due (refund) Filing statuses: (determined last day of tax year: head of household, unmarried at.

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Related Questions

Diego, age 28, married Dolores, age 27, in 2015. Their salariesfor the year amounted to $47,126 and they had interest income of$3,500. Diego and Dolores’ deductions for adjusted gross incomeamounted to $2,000, their itemized deductions were $11,576, andthey claimed two exemptions on their return.

a. What is the amount of their adjusted gross income? $

b. What is the amount of their itemized deductions or standarddeduction? $

c. What is the amount of their taxable income? d. What is theirtax liability for 2015?

Problem 10: Download the TAX 2000 Wk 1 Problem 10 Instructionsfor further information

Jim (age 50) and Martha (age 49) are married with threedependent children. They file a joint return for 2015. Their incomefrom salaries totals $49,500, and they received $10,125 in taxableinterest, $5,000 in royalties, and $3,000 in other ordinary income.Jim and Martha’s deductions for adjusted gross income amount to$3,200, and they have itemized deductions totalling $13,200.Calculate the following amounts:

a. Gross income

b. Adjusted gross income

c. Itemized deduction or standard deduction amount

d. Number of exemptions e. Taxable income

Chapter 2 Lab Work

The IRS requires that certain items be included in gross income,while other items can excluded from gross income. In this Lab Work,you'll be analyzing various scenarios to determine the appropriateamounts of income to include in gross income on Form 1040.

1. Indicate whether each of the items listed below would beincluded (I) in or excluded (E) from gross income for the 2015 taxyear.

a. Welfare payments

b. Commissions

c. Hobby income

d. Scholarships for room and board

e. $300 set of golf clubs, an employee award for length ofservice

f. Severance pay

g. Ordinary dividend of $50

h. Accident insurance proceeds received for personal bodilyinjury

i. Inheritances

j. Gifts

k. Tips and gratuities

2. John installed a new roof on his friend’s house in return fora used truck worth $6,000. How much income must John report on histax return for his services?

3. Larry is a tax accountant and Sheila is a hairdresser. Larryprepares Sheila’s tax return for free and Sheila agrees to styleLarry’s hair six times for free in return for the tax return. Thevalue of the tax return is approximately $300 and the hair stylingwork is approximately $300.

a. How much of the $300 is includable income to Larry? Why?

b. How much of the $300 is includable income to Sheila? Why?

11. How much of each of the following is taxable?

a. Cheline received a $50,000 gift bag from the Oscars during2015.

b. Jon received a gold watch worth $750 for 25 years of serviceto his accounting firm (not a qualified award).

c. Kerry won $1,000,000 in her state lottery.

d. Deborah is a professor who received $50,000 as an award forher scientific research from the university that employs her

Lance H. and Wanda B. Dean are married and live at 431 YuccaDrive, Santa Fe, NM 87501. Lance works for the convention bureau ofthe local Chamber of Commerce, while Wanda is employed part-time asa paralegal for a law firm.

During 2016, the Deans had the following receipts:

Salaries ($60,000 for Lance, $41,000 for Wanda) $101,000
Interest income—
City of Albuquerque general purposebonds $1,000
Ford Motor company bonds 1,100
Ally Bank certificate of deposit 400 2,500
Child support payments from John Allen 7,200
Annual gifts from parents 26,000
Settlement from Roadrunner Touring Company 90,000
Lottery winnings 600
Federal income tax refund (for tax year 2015) 400

Wanda was previously married to John Allen. When they divorcedseveral years ago, Wanda was awarded custody of their two children,Penny and Kyle. (Note: Wanda has never issued a Form 8332 waiver.)Under the divorce decree, John was obligated to pay alimony andchild support—the alimony payments were to terminate if Wandaremarried.

In July, while going to lunch in downtown Santa Fe, Wanda wasinjured by a tour bus. As the driver was clearly at fault, theowner of the bus, Roadrunner Touring Company, paid her medicalexpenses (including a one-week stay in a hospital). To avoid alawsuit, Roadrunner also transferred $90,000 to her in settlementof the personal injuries she sustained.

The Deans had the following expenditures for 2016:

Medical expenses (not covered by insurance) $7,200
Taxes—
Property taxes on personal residence $3,600
State of New Mexico income tax (includesamount withheld
from wages during 2016) 4,200 7,800
Interest on home mortgage (First National Bank) 6,000
Paid church pledge 3,600
Life insurance premiums (policy on Lance's life) 1,200
Contribution to traditional IRA (on Wanda's behalf) 5,000
Traffic fines 300
Contribution to the reelection campaign fund of the mayor ofSanta Fe 500
Funeral expenses for Wayne Boyle 6,300

The life insurance policy was taken out by Lance several yearsago and designates Wanda as the beneficiary. As a part-timeemployee, Wanda is excluded from coverage under her employer'spension plan. Consequently, she provides for her own retirementwith a traditional IRA obtained at a local trust company. Becausethe mayor is a member of the local Chamber of Commerce, Lance feltcompelled to make the political contribution.

The Deans' household includes the following, for whom theyprovide more than half of the support:

Social Security Number Birth Date
Lance Dean (age 42) 123-45-6786 12/16/1974
Wanda Dean (age 40) 123-45-6787 08/08/1976
Penny Allen (age 19) 123-45-6788 10/09/1997
Kyle Allen (age 17) 123-45-6789 05/03/1999
Wayne Boyle (age 75) 123-45-6785 06/15/1941

Penny graduated from high school on May 9, 2016, and isundecided about college. During 2016, she earned $8,500 (placed ina savings account) playing a harp in the lobby of a local hotel.Wayne is Wanda's widower father who died on January 20, 2016. Forthe past few years, Wayne qualified as a dependent of theDeans.

Federal income tax withheld is $5,200 (Lance) and $3,100(Wanda). The proper amount of Social Security and Medicare tax waswithheld.

how to find taxable interest? line 8a on 1040 form

Alice J. and Bruce M. Byrd are married taxpayers who file a joint return. Their Social Security numbers are 123-45-6789 and 111-11-1112, respectively. Alice’s birthday is September 21, 1969, and Bruce’s is June 27, 1968. They live at 473 Revere Avenue, Lowell, MA 01850. Alice is the office manager for Lowell Dental Clinic, 433 Broad Street, Lowell, MA 01850 (employer identification number 98-7654321). Bruce is the manager of a Super Burgers fast-food outlet owned and operated by Plymouth Corporation, 1247 Central Avenue, Hauppauge, NY 11788 (employer identification number 11-1111111). The following information is shown on their Wage and Tax Statements (Form W–2) for 2016.

Line Description

Alice Bruce 1 Wages, tips, other compensation $58,000 $62,100

2 Federal income tax withheld 4,500 6,300

3 Social Security wages 58,000 62,100

4 Social Security tax withheld 3,596 3,850

5 Medicare wages and tips 58,000 62,100

6 Medicare tax withheld 841 900

15 State Massachusetts Massachusetts

16 State wages, tips, etc. 58,000 62,100

17 State income tax withheld 2,950 3,100

The Byrds provide over half of the support of their two children, Cynthia (born January 25, 1992, Social Security number 123-45-6788) and John (born February 7, 1996, Social Security number 123-45-6786). Both children are full-time students and live with the Byrds except when they are away at college. Cynthia earned $4,200 from a summer internship in 2016, and John earned $3,800 from a part-time job. During 2016, the Byrds provided 60% of the total support of Bruce’s widower father, Sam Byrd (born March 6, 1940, Social Security number 123-45-6787). Sam lived alone and covered the rest of his support with his Social Security benefits. Sam died in November, and Bruce, the beneficiary of a policy on Sam’s life, received life insurance proceeds of $1,600,000 on December 28. The Byrds had the following expenses relating to their personal residence during 2016:

Property taxes $5,000

Qualified interest on home mortgage 8,700 Repairs to roof 5,750

Utilities 4,100

Fire and theft insurance 1,900

The Byrds had the following medical expenses for 2016:

Medical insurance premiums $4,500

Doctor bill for Sam incurred in 2015 and not paid until 2016 7,600

Operation for Sam 8,500

Prescription medicines for Sam 900

Hospital expenses for Sam 3,500

Reimbursement from insurance company, received in 2016 3,600

The medical expenses for Sam represent most of the 60% that Bruce contributed toward his father’s support. Other relevant information follows:

• When they filed their 2015 state return in 2016, the Byrds paid additional state income tax of $900.

• During 2016, Alice and Bruce attended a dinner dance sponsored by the Lowell Police Disability Association (a qualified charitable organization). The Byrds paid $300 for the tickets. The cost of comparable entertainment would normally be $50.

• The Byrds contributed $5,000 to Lowell Presbyterian Church and gave used clothing (cost of $1,200 and fair market value of $350) to the Salvation Army. All donations are supported by receipts, and the clothing is in very good condition.

• Alice and Bruce made a gift to a needy family who lost their home in a fire ($100). In addition, they made several cash gifts to homeless men downtown ($35).

• In 2016, the Byrds received interest income of $2,750, which was reported on a Form 1099–INT from Second National Bank, 125 Oak Street, Lowell, MA 01850 (Employer Identification Number 98-7654322). The mortgage (outstanding balance of $425,000 as of January 1, 2016) was taken out by the Byrds on May 1, 2012.

• Alice’s employer requires that all employees wear uniforms to work. During 2016, Alice spent $850 on new uniforms and $566 on laundry charges.

• Bruce paid $400 for an annual subscription to the Journal of Franchise Management and $741 for annual membership dues to his professional association.

• Neither Alice’s nor Bruce’s employer reimburses for employee expenses.

• The Byrds do not keep the receipts for the sales taxes they paid and had no major purchases subject to sales tax.

• All members of the Byrd family had health care coverage for all months of 2016.

• This year the Byrds gave each of their children $2,000, which was then deposited into their Roth IRAs.

• Alice and Bruce paid no estimated Federal income tax.

Neither Alice nor Bruce wants to designate $3 to the Presidential Election Campaign.

Tax Computation:

Compute net tax payable or refund due for Alice and Bruce Byrd for 2016. If they have overpaid, they want the amount to be refunded to them. If you use tax forms for your computations, you will need Forms 1040 and 2106 and Schedules A and B.