Tax problems- comprehensive problems

Comprehensive
Problems
67. This year Evan graduated from college, and
took a job as a deliveryman in the city.
Evan was paid a salary of $68,500 and he received $700 in hourly pay for
part-time work over the weekends. Evan
summarized his expenses below.
Cost of moving his possessions
to the city (125 miles away)$ 1,200
Interest paid on accumulated
student loans 2,800
Cost of purchasing a
delivery uniform 1,400
Contribution to State
University deliveryman program 1,300
Calculate
Evan’s AGI and taxable income if
he files single with one personal exemption. Assume that interest payments were
initially required on Evan’s student loans this year.

68. {Tax
Forms} Read the following letter and help Shady Slim with his tax
situation. Please assume that gross
income is $172,900 for purposes of this problem.
December 31, 2014
To the friendly
student tax preparer:
Hi, it’s Shady Slim again. I just got
back from my 55th birthday party, and I’m told that you need some
more information from me in order to complete my tax return. I’m an open
book! I’ll tell you whatever I think you
need to know.
Let me tell you a few more things about
my life. As you may recall, I am divorced from my wife, Alice. I know that it’s
unusual, but I have custody of my son, Shady, Jr. The judge owed me a few
favors and I really love the kid. He lives with me full-time and my wife gets
him every other weekend. I pay the vast majority of my son’s expenses. I think
Alice should have to pay some child support, but she doesn’t have to pay a
dime. The judge didn’t owe me that much, I guess.
I had to move this year after getting my
job at Roca Cola. We moved on February 3 of this year, and I worked my job at
Roca Cola for the rest of the year. I still live in the same state, but I moved
500 miles away from my old house. I left a little bit early to go on a
house-hunting trip that cost me a total of $450. I hired a moving company to
move our stuff at a cost of $2,300. Junior and I got a hotel room along the way
that cost us $42 (I love Super 8!). We spent $35 on meals on the way to our new
home. Oh yeah, I took Junior to a movie on the way and that cost $20.
Can you believe I’m still paying off my
student loans, even after 15 years? I
paid a total of $900 in interest on my old student loans this year.
Remember when I told you about that guy
that hit me with his car? I had a bunch
of medical expenses that were not reimbursed by the lawsuit or by my insurance.
I incurred a total of $20,000 in medical expenses, and I was only reimbursed
for $11,000. Good thing I can write off medical expenses, right?
I contributed a lot of money to charity
this year (and have receipt documentation for all contributions). I’m such a
nice guy! I gave $1,000 in cash to the
March of Dimes. I contributed some of my old furniture to the church. It was
some good stuff! I contributed a red
velvet couch and my old recliner. The
furniture is considered vintage and is worth $5,000 today (the appraiser
surprised me!), even though I only paid $1,000 for it back in the day. When I
contributed the furniture, the pastor said he didn’t like the fabric and was
going to sell the furniture to pay for some more pews in the church. Some people
just have no taste, right? Roca Cola had
a charity drive this year and I contributed $90. Turns out, I don’t even miss it, because Roca
Cola takes it right off my paycheck every month…$15 a month starting in July.
Oh, one other bit of charity from me this year. An old buddy of mine was down
on his luck. He lost his job and his house. I gave him $500 to help him out.
I paid a lot of money in interest this
year. I paid a total of $950 in personal credit card interest. I also paid
$13,000 in interest on my home mortgage. I also paid $2,000 in real estate
taxes for my new house.
A few other things I want to tell you
about last year. Someone broke into my house and stole my kid’s brand new
bicycle and my set of golf clubs. The total loss from theft was $900. I paid
$100 in union dues this year. I had to pay $1,000 for new suits for my job.
Roca Cola requires its managers to wear suits every day on the job. I spent a
total of $1,300 to pay for gas to commute to my job this year.
Oh, this is pretty cool. I’ve always
wanted to be a firefighter. I spent $1,000 in tuition to go to the local
firefighter’s school. I did this because someone told me that I can deduct the
tuition as an itemized deduction, so the money would be coming back to me.
That should be all the information you
need right now. Please calculate my taxable income and complete pages 1 and 2
of Form 1040 (through taxable income, line 43) and Schedule A. You’re still
doing this for free, right?
69. Jeremy and Alyssa Johnson have been married
for five years and do not have any children.
Jeremy was married previously and has one child from the prior
marriage. He is self-employed and
operates his own computer repair store.
For the first two months of this year, Alyssa worked for Staples, Inc.
as an employee. In March, Alyssa
accepted a new job with Super Toys, Inc. (ST) where she worked for the
remainder of the year. This year the Johnsons
received $255,000 of gross income.
Determine the Johnson’s AGI
given the following information (assume the 2013 rules apply for purposes of
the qualified education expense deduction):

a. Expenses associated with Jeremy’s store
include $40,000 in salary (and employment taxes) to employees, $45,000 of supplies,
and $18,000 in rent and other administrative expenses.
b. As a salesperson, Alyssa incurred $2,000
in travel expenses related to her employment that were not reimbursed by her
employer.
c. The Johnsons own a piece of investment
real estate. They paid $500 of real
property taxes on the property and they incurred $200 of expenses in travel
costs to see the property and to evaluate other similar potential investment
properties.
d. The Johnsons own a rental home. They incurred $8,500 of expenses associated
with the property.
e. The Johnson’s home was only five miles
from the Staples store where Alyssa worked in January and February. The ST store was 60 miles from their home, so
the Johnsons decided to move to make the commute easier for Alyssa. The Johnson’s new home was only ten miles
from the ST store. However, it was 50
miles from their former residence. The
Johnsons paid a moving company $2,000 to move their possessions to the new
location. They also drove the 50 miles
to their new residence. They stopped
along the way for lunch and spent $60 eating at Denny’s. None of the moving expenses were reimbursed
by ST.
f. Jeremy paid $4,500 for health insurance
coverage for himself (not through an exchange).
Alyssa was covered by health plans provided by her employer, but Jeremy
is not eligible for the plan until next year.
g. Jeremy paid $2,500 in self-employment
taxes ($1,250 represents the employer portion of the self-employment taxes).
h. Jeremy paid $5,000 in alimony and $3,000
in child support from his prior marriage.
i. Alyssa paid $3,100 of tuition and fees
to attend night classes at a local university.
The Johnsons would like to deduct as much of this expenditure as
possible rather than claim a credit.
j. The Johnsons donated $2,000 to their
favorite charity.

70. {Tax Forms} Shauna Coleman is single. She works as an architectural designer for
Streamline Design (SD). Shauna wanted to determine her taxable income. She correctly calculated her AGI.
However, she wasn’t sure how to compute the rest of her taxable
income. She provided the following
information with hopes that you could use it to determine her taxable income.

a. Shauna
paid $4,675 for medical expenses and Blake, Shauna’s boyfriend, drove Shauna
(in her car) a total of 115 miles so that she could receive care for a broken
ankle she sustained in a biking accident.

b. Shauna
paid a total of $3,400 in health insurance premiums during the year (not
through an exchange). SD did not
reimburse any of this expense. Besides
the health insurance premiums and the medical expenses for her broken ankle,
Shauna had Lasik eye surgery last year and she paid $3,000 for the surgery (she
received no insurance reimbursement).
She also incurred $450 of other medical expenses for the year.
c. SD
withheld $1,800 of state income tax, $7,495 of Social Security tax, and $14,500
of federal income tax from Shauna’s paychecks throughout the year.
d. In
2014, Shauna was due a refund of $250 for overpaying her 2013 state taxes. On her 2013 state tax return that she filed
in April of 2014, she applied the overpayment towards her 2014 state tax
liability. She estimated that her state
tax liability for 2014 will be $2,300.
e. Shauna
paid $3,200 of property taxes on her personal residence. She also paid $500 to the developer of her
subdivision, because he had to replace the sidewalk in certain areas of the
subdivision.
f. Shauna
paid a $200 property tax based on the state’s estimate of the value of her car.
g. Shauna
has a home mortgage loan in the amount of $220,000 that she secured when she
purchased the home. The home is worth
about $400,000. Shauna paid interest of
$12,300 in interest on the loan this year.
h. Shauna
made several charitable contributions throughout the year. She contributed stock in ZYX Corp. to the Red
Cross. On the date of the contribution,
the FMV of the donated shares was $1,000 and her basis in the shares was
$400. Shauna originally bought the ZYX
Corp. stock in 2008. Shauna also contributed $300 cash to State University and
religious artifacts she has held for several years to her church. The artifacts were valued at $500 and
Shauna’s basis in the items was $300.
Shauna had every reason to believe the church would keep them on display
indefinitely. Shauna also drove 200
miles doing church-related errands for her minister. Finally, Shauna contributed $1,200 of
services to her church last year.
i. Shauna’s
car was totaled in a wreck in January. The car was worth $14,000 and her cost
basis in the car was $16,000. The car
was a complete loss. Shauna received
$2,000 in insurance reimbursements for the loss.
j. Shauna
paid $300 for architectural design publications, $100 for continuing education
courses to keep her up to date on the latest design technology, and $200 for
professional dues to maintain her status in a professional designer’s
organization.
k. Shauna
paid $250 in investment advisory fees and another $150 to have her tax return
prepared (that is, she paid $150 in 2014 to have her 2013 tax return prepared).
l. Shauna
is involved in horse racing as a hobby.
During the year, she won $2,500 in prize money and incurred $10,000 in
expenses. She has never had a profitable
year with her horse racing activities, so she acknowledges that this is a hobby
for federal income tax purposes.
m. Shauna
sustained $2,000 in gambling losses over the year (mostly horse-racing bets)
and only had $200 in winnings.
Required:
A. Determine Shauna’s taxable income and
complete page 2 of Form 1040 (through taxable income, line 43) and Schedule A
assuming her AGI is $107,000.
B. Determine Shauna’s taxable income and
complete page 2 of Form 1040 (through taxable income, line 43) and Schedule A
assuming her AGI is $207,000

71. {Tax Forms} Joe and Jessie are married and
have one dependent child, Lizzie. Lizzie
is currently in college at State University.
Joe works as a design engineer for a manufacturing firm while Jessie
runs a craft business from their home.
Jessie’s craft business consists of making craft items for sale at craft
shows that are held periodically at various locations. Jessie spends considerable time and effort on
her craft business and it has been consistently profitable over the years. Joe and Jessie own a home and pay interest on
their home loan (balance of $220,000) and a personal loan to pay for Lizzie’s
college expenses (balance of $35,000).
Neither Joe nor Jessie is blind or
over age 65, and they plan to file as married-joint. Based on their estimates, determine Joe and
Jessie’s AGI and taxable income
for the year and complete pages 1 and 2 of Form 1040 (through taxable income,
line 43) and Schedule A. Assume the 2013 rules apply for purposes of the
qualified education expense deduction and that the employer portion of the
self-employment tax on Jessie’s income is $808. Joe and Jessie have summarized
the income and expenses they expect to report this year as follows:

Income:
Joe’s salary $ 119,100
Jessie’s
craft sales 18,400
Interest
from certificate of deposit 1,650
Interest
from Treasury bond funds 727
Interest
from municipal bond funds 920
Expenditures:
Federal
income tax withheld from Joe’s wages $ 13,700
State income
tax withheld from Joe’s wages 6,400
Social
Security tax withheld from Joe’s wages 7,482
Real estate
taxes on residence 6,200
Automobile
licenses (based on weight) 310
State sales
tax paid 1,150
Home
mortgage interest 14,000
Interest on
Masterdebt credit card 2,300
Medical
expenses (unreimbursed) 1,690
Joe’s
employee expenses (unreimbursed) 2,400
Cost of
Jessie’s craft supplies 4,260
Postage for
mailing crafts 145
Travel and
lodging for craft shows 2,230
Meals during
craft shows 670
Self-employment
tax on Jessie’s craft income 1,615
College
tuition paid for Lizzie 5,780
Interest on
loans to pay Lizzie’s tuition 3,200
Lizzie’s
room and board at college 12,620
Cash
contributions to Red Cross 525