Accounting -Individual Income Taxation

| January 31, 2017

Question
Individual Income Taxation

Take Home Quiz 1

Fall 2015

PROBLEM 1

Jan, 38, is single and has AGI of $123,000 in 2015. Her potential itemized deductions before any limitations for the year total $77,650 and consist of the following:

Medical expenses (before floor) $17,500

Interest on home mortgage ($580,000 acquisition debt) 31,900

State income tax 6.090

State sales tax 960

Real estate tax 7,700

Charitable contribution 13,500

What is the total amount of itemized deductions Jan may claim on her tax return, what is Jan’s taxable income and tax liability?

PROBLEM 2

For each of the following situations determine the requested amounts.

Situation 1

Beth (age 43) and Bart (age 48) are married taxpayers who choose to file a joint tax return. They have three minor dependent children (Barbara, Bonnie and Baxter). Bonnie and Baxter are in elementary school. Barbara is 21 and a full-time college student. Barbara earned $5,600 at a job and had $15 in interest income during 2015. Barbara did not provide more than ½ of her own support. Beth’s step-mother (age 72) and one of her step-sisters (age 49), also live with them and qualify as Beth and Bart’s dependents. Beth and Bart’s total gross income for 2015 is $172,000. They have $12,800 of for AGI deductions and their itemized deductions (after any floors) total $30,900 and are comprised of the following:

Medical $3,200

Charitable Contributions 4,000

Mortgage interest 14,200

Real Estate taxes 8,000

Miscellaneous itemized 1,500

Filing status, number of exemptions, taxable income and tax liability for Beth and Bart?

Filing status, number of exemptions, taxable income and tax liability for Barbara?

Situation 2

Curt, age 65 and single, maintained a home where his mother resided for the entire year. He earned a salary of $69,000. He paid all of the bills related to his mother since she had no income for 2015. Curt also incurred itemized deductions of $8,520 (none subject to any AGI limitations)

Filing status, number of exemptions, taxable income and tax liability for Curt?

PROBLEM 3

For each of the following situations, determine the amount of Gross Income to be included by the taxpayer.

Situation 1

April received the following items in 2015

Salary $ 35,800

Productivity bonus 3,000

Alimony 9,000

Child support 20,000

State tax refund (no deduction taken in 2014) 1,530

Interest on Wayne County school bonds 10,000

Worker’s compensation 11,000

Dental insurance premiums (paid by employer) 1,700

Medical insurance premiums (paid by employer) 6,000

Reimbursement for medical benefits (not deducted) 500

Reimbursement for lost wages from an employer

provided plan 1,000

Life insurance proceeds from deceased uncle’s policy 15,000

Situation 2

John, age 23, is a full time student at Wayne State University and a candidate for a bachelor’s degree in Accounting. During 2015, he received the following items:

Salary $ 4,200

Sale of term papers 400

Loan from financial aid office 7,500

Cash prize from radio contest 700

Inheritance from aunt 30,000

Unemployment compensation 1,000

Scholarship for room and board 4,000

Tuition Scholarship 2,000

Spring Break trip paid for by grandfather 950

PROBLEM 4

Courtney made the following contributions during 2015. Courtney had purchased the stock and painting many years ago as investments.

Charity

Property

Cost

Fair Market Value

University

Cash

$15,000

$15,000

Red Cross

Cash

$14,500

$14,500

History Museum

Painting

5,000

82,000

Medical Center

Stock

28,000

17,000

Assume Courtney has AGI of $150,000 what is her maximum charitable contribution for 2015?

Assume Courtney has AGI of $260,000 what is her maximum charitable contribution for 2015?

PROBLEM 5

In 2015, Georgia had the following insured personal casualty losses (arising from one casualty). Georgia also had $20,000 adjusted gross income for the year.

Adjusted Fair Market Value Insurance

Asset Basis Before After Recovery

A 1,200 1,000 200 100

B 3,000 2,000 0 500

C 600 800 0 100

What is Georgia’s itemized deduction for her casualty losses?

PROBLEM 6

Calculate the net income includible in taxable income for the following hobby. Presume Val has AGI of $69,000 before considering anything from the hobby activity.

Income

27,000

Mortgage interest and property taxes allocable to hobby

9,000

Depreciation

5,000

Supplies and fees

11,000

Telephone for hobby

2,800

Computer usage fees

2,000

In the alternative, what would be Val’s adjusted gross income for the year if the activity were not considered a hobby?

PROBLEM 7

In 2014 Sara graduated from Wayne State University and got a job in Detroit, where she lived. In February of 2015 she got a job offer from a company headquartered in Atlanta, Georgia. She accepted the job offer and started work in Atlanta on March 1, 2015. She is still employed at the company today and has no intention of changing jobs anytime soon. After the offer and prior to starting work, she traveled to Atlanta to look for suitable housing. Her round trip flight cost $350 and she incurred $170 in rental car expenses, and $480 in costs for meals and lodging. She successfully found a place to live. Also prior to starting work she hired a moving company to more her possessions to Atlanta for $1,100 and she drove her own car the 723 miles to Atlanta. She stayed two nights in motels along the way, incurring $366 in costs for lodging and $118 in costs for meals along the way. (For 2015, the standard mileage rate for using your vehicle to move to a new home is 23 cents per mile.) Her new employer provided her, like its other new out of state hires, a moving allowance of $750. What was the effect on Sara’s AGI for 2015 from these transactions?

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