None Jack & Ping Liu are married and have three children: Scott, Stacy and Suzy. Scott is 18 years old and physicallydisabled (he qualifies for the disability tax credit). Stacy is 12 years old, and Suzy is 6 years old. They pay theirlive-in nanny $250 per week to take care of their children for 48 weeks each year. Jack works full-time and earnsa salary of $80,000 per year. Ping works part-time, earning a salary of $30,000 per year. She also attends aCanadian university on a full-time basis during the winter semester for a total of 16 weeks or 4 months in thecurrent year. Can Jack and/or Ping deduct child care expenses on their tax returns for the year? On whose returnshould the deduction be claimed? What is the maximum amount of child care expenses that can be deducted?

Child care expenses in Canada may be deducted under Section 63 of the Income Tax Act if they are…

Answered: Jack & Ping Liu are married and have…

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter6: Business Expenses

Section: Chapter Questions

Problem 67P

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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.
Jeff and Rhonda are married and have two children, Max and Jen. Max is 20, attends college in the Los Angeles area hill-time, and works as a stunt double for a television show while he is in school. Max earns 15,000 per year as a stunt double and lives at home when school is not in session. Jeff and Rhonda pay for Maxs tuition and all of his living expenses. Jen, who lives at home, is 18 years old and makes 18,000 per year working full-time as an office administrator. Jeff and Rhonda pay for 65 percent of Jens living expenses. In addition, Rhondas mother, Joanne (a widow), resides with the family, earns 3,000 per year in interest and dividends from her investments, and receives 9,000 per year in Social Security benefits. Jeff and Rhonda receive no rent from Joanne and provide all the support she needs for the year. Everyone mentioned is a U.S. citizen. How many people qualify as dependents for Jeff and Rhondas income tax return? a. Two b. Three c. Four d. Five
Jane and Robert Brown are married and have eight children, all of whom are eligible to be claimed as the couples dependents. Robert earns 196,000 working as senior manager in a public accounting firm, and Jane earns 78,000 as a second-grade teacher. Given their large family, they live in a frugal manner. The Browns maintain a large garden and some fruit trees from which they get most of their produce, and the children take family and consumer science classes so that they can help make the familys clothing. The Browns record no gross income other than their salaries (all of their investment income is earned from qualified retirement savings), and their itemized deductions are less than the standard deduction. In addition, they incur no additional adjustments or preferences for AMT purposes. a. What is the couples 2019 regular tax liability? b. What is the couples 2019 AMT? c. Express the calculation of the couples AMT for 2019 as a Microsoft Excel formula. Place any parameter that could change annually in a separate cell, and incorporate the cell references into the formula.
Jane is 20 years old and is a sophomore at Lake University. She is a full-time student and does not have any gross income. Jane spends the holidays and summers at home with her parents. Her total support for the current tax year is 30,000, including a scholarship for 5,000 to cover her tuition. Jane used 12,000 of her savings, and her grandparents provided 13,000. Which of the following statements regarding the dependency rules for Jane is true? a. If Janes parents (rather than her grandparents) provided the 13,000, then they would not be able to claim Jane as a dependent because Jane provided more than half of her own support. b. Janes grandparents can claim her as a dependent because Jane did not provide more than half of her own support. c. Janes grandparents cannot claim her as a dependent because Jane provided more than half of her own support. d. Jane does not qualify as a dependent for either her parents or grandparents.
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
Robin and Howie file married filing jointly and have a 13 -year-old daughter. They also provide all the support for Howie's 82 -year-old mother, who lives in a nursing home nearby. The amount of the combined child tax credit and other dependent credit for Robin and Howie is: $0 $1,000 $1,500 $2,000 $2,500
Leroy and Amanda are married and have three dependent children. During the current year, they have the following income and expenses: Salaries 120,000 Interest income 45,000 Royalty income 27,000 Deductions for AGI 3,000 Deductions from AGI 9,000 a. What is Leroy and Amandas current year taxable income and income tax liability? b. Leroy and Amanda would like to lower their income tax. How much income tax will they save if they validly transfer 5,000 of the interest income to each of their children? Assume that the children have no other income and that they are entitled to a 1,050 standard deduction.
Jack & Ping Liu are married and have three children: Scott, Stacy and Suzy. Scott is 18 years old and physically disabled (he qualifies for the disability tax credit). Stacy is 12 years old, and Suzy is 6 years old. They pay their live-in nanny $250 per week to take care of their children for 48 weeks each year. Jack works full-time and earns a salary of $80,000 per year. Ping works part-time, earning a salary of $30,000 per year. She also attends a Canadian university on a full-time basis during the winter semester for a total of 16 weeks or 4 months in the current year. Can Jack and/or Ping deduct child care expenses on their tax returns for the year? On whose return should the deduction be claimed? What is the maximum amount of child care expenses that can be deducted?
Brian and Monika are married and they have two children, aged 15 and 19. The 19 year old child is paralyzed and confined to a wheelchair. Monika and Brian pay a live-in nanny $27,000 per year to take care of their children for the entire year. Brian works full time and earns a salary of $119,000 per year. Monika works part time, earning a salary of $44,000 per year. Monika is also upgrading her education and goes to college part time during the fall semester, for a total of 12 weeks or 3 months in the current year. Which of the following is correct with respect to Brian and Monika's ability to claim a deduction for child care expenses? OA. Brian can claim child care expenses of $1,200 and Monika can claim the remaining $14,800. OB. Monika can claim child care expenses of $16,000. OC. Brian can claim child care expenses of $16,000. OD. Neither Brian nor Monika can claim child care expenses as the child care expenses are paid to a live-in nanny.
Sue, aged 48 and Paul, aged 49 have two daughters- Leena aged 17 and Reena aged 15. Sue works as a part-time teacher in a secondary school and earns a $26,000 p.a. salary (plus minimum superannuation guarantee contribution).Paul works as a dentist and earns $145,000 (plus minimum superannuation guarantee contribution). Paul is anxious about their post-retirement financial situation. The couple has approached you for financial advice in respect of reducing the tax payable and their retirement planning. Superannuation Sue (20% Tax Free) 270,000 Sue’s Superannuation asset allocation Investment Asset Allocation Performance p.a. after tax Australian Share 50% 4% Cash & Fixed Interest 15% 1.4% International Shares 30% 10.80% Property 5% 3.10% Calculate the expected return for Sue’s superannuation portfolio using the return for the year ended 2022. Explain to Sue why her superannuation…
Martin and Rachel are married and have a 3-year-old child. Martin is going to medical school full-time for 12 months of the year and Rachel earns $45,000. Their child is in day care so Martin can go to school while Rachel is at work. The cost of their day care is $10,000. What is their child and dependent care credit? Please show your calculations.
Kyle (44) and Elise (39) Terry have four children. Kyle works for Lockheed Martin as a flight engineer and Elise is a freelance writer/editor. Their family is covered by a qualified High Deductible Health Insurance Plan. Kyle's gross pay is $120,000 nd Elise's net earnings from self-employment is $75,000. Their children are Jacob(16), Katie(14), Rachael(12), and Luke(10). For the current tax year, Kyle and Elise prepared for retirement. Kyle's plan is a profit sharing plan and Elise utilizes a SEP IRA. Kyle's employer contributes 14% of his gross pay to the profit sharing plan. Kyle pays the health insurance premiums through his employer's cafeteria plan, his portion of the health insurance premiums are $7,000 per year. Kyle also incurred the following expenses during the year: $1,900 in student loan interest, $4,000 contribution to Utah's 529 plan ($1,000 for each child, kyle lives in Georgia); State income taxes of $12,000; property taxes of $4,000; mortgage interest of $10,000; and…

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