Hi expart Provide solution Clark, a widower, maintains a household for himself andhis two dependent preschool children. For the yearended December 31, 2015, Clark earned a salary of$32,000. He paid $3,600 to a housekeeper to care for hischildren in his home, and also paid $1,500 to a kiddie playcamp for child care. He had no other income orexpenses during 2015. How much can Clark claim as achild and dependent care credit in 2015?a. $910.b. $1,300.c. $1,326.d. $5,100.e. None of the above.

Step 1: Introduction to the Income taxIncome tax refers to the levied amount imposed on the net…

Answered: Clark, a widower, maintains a household…

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter4: Gross Income: Concepts And Inclusions

Section: Chapter Questions

Problem 49P

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John Benson, age 40, is single. His Social Security number is 111-11-1111, and he resides at 150 Highway 51, Tangipahoa, LA 70465. John has a 5-year-old child, Kendra, who lives with her mother, Katy. As a result of his divorce in 2016, John pays alimony of 6,000 per year to Katy and child support of 12,000. The 12,000 of child support covers 65% of Katys costs of rearing Kendra. Kendras Social Security number is 123-45-6789, and Katys is 123-45-6788. Johns mother, Sally, lived with him until her death in early September 2019. He incurred and paid medical expenses for her of 15,588 and other support payments of 11,000. Sallys only sources of income were 5,500 of interest income on certificates of deposit and 5,600 of Social Security benefits, which she spent on her medical expenses and on maintenance of Johns household. Sallys Social Security number was 123-45-6787. John is employed by the Highway Department of the State of Louisiana in an executive position. His salary is 95,000. The appropriate amounts of Social Security tax and Medicare tax were withheld. In addition, 9,500 was withheld for Federal income taxes and 4,000 was withheld for state income taxes. In addition to his salary, Johns employer provides him with the following fringe benefits. Group term life insurance with a maturity value of 95,000; the cost of the premiums for the employer was 295. Group health insurance plan; Johns employer paid premiums of 5,800 for his coverage. The plan paid 2,600 for Johns medical expenses during the year. Upon the death of his aunt Josie in December 2018, John, her only recognized heir, inherited the following assets. Three months prior to her death, Josie gave John a mountain cabin. Her adjusted basis for the mountain cabin was 120,000, and the fair market value was 195,000. No gift taxes were paid. During the year, John reported the following transactions. On February 1, 2019, he sold for 45,000 Microsoft stock that he inherited from his father four years ago. His fathers adjusted basis was 49,000, and the fair market value at the date of the fathers death was 41,000. The car John inherited from Josie was destroyed in a wreck on October 1, 2019. He had loaned the car to Katy to use for a two-week period while the engine in her car was being replaced. Fortunately, neither Katy nor Kendra was injured. John received insurance proceeds of 16,000, the fair market value of the car on October 1, 2019. On December 28, 2019, John sold the 300 acres of land to his brother, James, for its fair market value of 160,000. James planned on using the land for his dairy farm. Other sources of income for John are: Potential itemized deductions for John, in addition to items already mentioned, are: Part 1Tax Computation Compute Johns net tax payable or refund due for 2019. Part 2Tax Planning Assume that rather than selling the land to James, John is considering leasing it to him for 12,000 annually with the lease beginning on October 1, 2019. James would prepay the lease payments through December 31, 2019. Thereafter, he would make monthly lease payments at the beginning of each month. What effect would this have on Johns 2019 tax liability? What potential problem might John encounter? Write a letter to John in which you advise him of the tax consequences of leasing versus selling. Also prepare a memo addressing these issues for the tax files.
Nadia died in 2018 and is survived by her husband, Jerold (age 44); her married son, Travis (age 22); and her daughter-in-law, Macy (age 18). Jerold is the executor of his wifes estate. He maintains the household where he, Travis, and Macy live and furnishes all of their support. During 2018 and 2019, Travis is a full-time student, and Macy earns 7,000 each year from a part-time job. Travis and Macy do not file jointly during either year. What is Jerolds filing status for 2018 and 2019 if all parties reside in: a. Idaho (a community property state)? b. Kansas (a common law state)?
Malin is a married taxpayer and has three dependent children. Malin's employer offers health insurance for employees and Malin takes advantage of the benefit for her entire family (her spouse's employer also offers health insurance but they opt out). During the year, Malin paid $ 1,200 toward her family's health insurance premiums through payroll deductions while the employer paid the remaining $ 9,200. Malin's family visited health care professionals numerous times during the year and made total copayments toward medical services of $280. Malin's daughter had knee surgery due to a soccer injury and the insurance company paid the hospital $ 6,700$ directly and reimbursed Malin $400 for her out-of-pocket health care expenses related to the surgery. How much gross income should Malin recognize related to her health insurance? $0 $ 9,200 14,020(9,200+6,7001,200280400) 8,000(9,2001,200) None of the above
Paul Barrone is a graduate student at State University. His 10-year-old son, Jamie, lives with him, and Paul is Jamies sole support. Pauls wife died in 2018, and Paul has not remarried. Paul received 320,000 of life insurance proceeds (related to his wifes death) in early 2019 and immediately invested the entire amount as shown below. Paul had 42,000 of taxable graduate assistant earnings from State University and received a 10,000 scholarship. He used 8,000 of the scholarship to pay his tuition and fees for the year and 2,000 for Jamies day care. Jamie attended Little Kids Daycare Center, a state-certified child care facility. Paul received a statement related to the Green bonds saying that there was 45 of original issue discount amortization during 2019. Paul maintains the receipts for the sales taxes he paid of 735. Paul lives at 1610 Cherry Lane, Bradenton, FL 34212, and his Social Security number is 111-11-1111. Jamies Social Security number is 123-45-6789. The university withheld 2,000 of Federal income tax from Pauls salary. Paul is not itemizing his deductions. Part 1Tax Computation Compute Pauls lowest tax liability for 2019. Part 2Tax Planning Paul is concerned because the Green bonds were worth only 18,000 at the end of 2019, 5,000 less than he paid for them. He is an inexperienced investor and wants to know if this 5,000 is deductible. The bonds had original issue discount of 2,000 when he purchased them, and he is curious about how that affects his investment in the bonds. The bonds had 20 years left to maturity when he purchased them. Draft a brief letter to Paul explaining how to handle these items. Also prepare a memo for Pauls tax file.
Joy incurs the following expenses in her business. When can she deduct the expenses if she uses the accrual method of accounting? the cash method? a. Joy rents an office building for 750 a month. Because of a cash flow problem, she is unable to pay the rent for November and December 2019. On January 5, 2019, Joy pays the 2,250 rent due for November, December, and January. b. Joy borrows 60,000 on a 1-year note on October 1, 2019. To get the loan, she has to prepay 6,200 in interest. c. Joy owes employees accrued wages totaling 20,000 as of December 31, 2019. The accrued wages are paid in the regular payroll on January 5, 2020. d. Joy purchases 2,400 worth of supplies from a local vendor. The supplies are delivered on January 29, 2019. They are fully used up on December 30, 2019. Because of unusual circumstances, a bill for the supplies arrives from the vendor on January 10, 2020, and is promptly paid. e. While at a trade convention, Joy purchases some pens and paperweights to send out as holiday gifts to her clients. She charges the 700 cost to her credit card in December 2019. She pays the credit card bill in January 2020.
Bill and Jane Jones were divorced on January 1, 2018. They have no children. In accordance with the divorce decree, Bill transferred the title of their house over to Jane. The home had a fair market value of 250,000 and was subject to a 100,000 mortgage. Under the divorce agreement, Bill is to make 1,000 monthly mortgage payments on the home for the remainder of the mortgage. In the current year, Bill made 12 mortgage payments. What amount is taxable to Jane in the current year? a. 12,000 b. 250,000 c. 100,000 d. 0
Greg died on July 1,2019 , and left Lea, his wife, a $45,000 life insurance policy which she elects to receive at $9,000 per year plus interest for 5 years. In the current year, Lea receives $9,500. How much should Lea include in her gross income? $____________

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