Carl Chubbs, age 64, earned $55,000 during 2013

| October 22, 2018

1) Carl Chubbs, age 64, earned $55,000 during2013. His wife, Dawn, age 66, is blind. During 2013, Carl and Dawn received $1,000 in dividends. They sold their personal use automobile which they had owned for two years (adjusted basis of $18,500) for $19,000. They sold to their son 50 shares of Riverdale Corp.stock for $500. Their basis was $12 per share; fair market value was $20 per share. Carl andDawn sold property Carl had inherited from his sister for $12,500. At the time of Carl’s sister’sdeath the basis of the property was $7,500 and the fair market value was $10,000; six monthsafter death the fair market value was $9,000. The alternate valuation date was elected by theexecutor in valuation of the estate of Carl’s sister. In addition, Carl and Dawn paid $8,500interest on their home, made a cash contribution to their college alumni foundation in the amountof $5,000, paid state sales taxes of $500, paid state income taxes of $2,500, paid federal incometaxes of $8,000, and had medical expenses of $800. Compute Carl and Dawn’s taxable income.Treat all income as ordinary income2) Barry and Connie Rawles, husband and wife, are both age 34 and have 2 sons. Barry earned $51,000 and Connie earned $45,000 during 2013.Barry and Connie paid $3,200 state income taxes $4,600 to first Presbyterian Church, $600 to needy families, $6,400 interest on their home mortgage, and $6,800 medical expenses. In addition, they had the following transactions:They sold their personal residence for $170,000. Their basis in the residence was $104,000. They incurred $7,000 in selling expenses. They purchased a new home six months later for $220,000.Connie sold for $40,000property she had inherited from her father in 2008. Her father’s basis in the property was $15,000 and the fair market value on the date of death was $30,000They sold for $6,000 business property which they had acquired as a gift in 2010. The basis to the donor was $7,500 and the fair market value on the date of the gift was $7,000.They exchanged 100 shares of Conway Corp. common stock with a basis of $3,000, for 75 shares of Conway Corp. nonvoting common stock with a fair market value of $10,000.Determine Barry and Connie’s lowest taxable income. Treat all income as ordinary income.

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