Pam is separated from her husband, Ted. Ted moved to an apartment in the same city two years ago, but they have not finalized their divorce yet. They live in a common law state. They have one daughter, Rainey, who is eight years old and lives with Pam most of the time. She spends every other weekend and usually one week night with her father. Ted works for XYZ International. He earned a salary of $96,000 for the current year. His salary was his only source of income. Pam works for ABC Corp. as an accountant. Her salary for the current year was $88,000. ABC is a great place to work. Pam’s health insurance (valued at $4,800 per year) and $6,000 in childcare benefits are provided by ABC Corp. She even received a Christmas bonus of $2,500 in addition to her salary. She held on to the check until January when she cashed it to use on a ski vacation for her and Rainey. Pam slipped and fell at work. She had to undergo surgery on her ankle. She received worker’s compensation benefits totaling $3,200. Her medical bills were covered by the worker’s compensation policy as well. She received a federal income tax refund of $1,200 and a state income tax refund of $550 from her prior year tax return. She filed last year’s taxes on March 2 and received both of these refunds in April of the current year. She did itemize deductions last year and her itemized deductions were significantly higher than her standard deduction. Pam has a number of investments. She sold her stock in Alphabet (Google) for $10,000. She had purchased the stock twelve years ago for $8,000. (Profit of $2,000) She also sold some stock in General Electric. She purchased the stock ten months before selling it, and she ended up with a loss of $850 in just that short time! Her remaining portfolio of investments (other than those discussed in the previous paragraph) increased in value during the course of the year. By December 31, the total increase was $5,500. In addition to these investments, her mother gave her stock valued at $25,000. Pam’s mother had a basis in the stock of $12,000 and had owned the stock for 7 years before giving it to Pam. Pam received $200 in interest on corporate bonds, $50 in interest on state bonds, and $700 in qualified dividends. Since Pam is an accountant, she does a little bit of work on the side. She prepares the payroll tax returns and income tax returns for her veterinarian. In return for doing those taxes, Pam gets her pets’ vaccinations, grooming services, and some boarding time for free. Pam figures she is saving about $1,500 on the cost of veterinary care for her pets. She is a 20% shareholder in an S corporation that paid her $5,000 in salary to do the bookkeeping, and gave her an additional $6,000 in distributions. The manager of the S corporation exclaimed that next year if they do nearly so well, that distribution might even be larger! This year they netted earnings of $500,000!!(20% x $500k = $100,000) Pam owns a single-family house that she uses for rental property. The property was vacant during January and February, but she found a nice couple with two children and a dog to move in at the beginning of March. The house rents for $800 per month. She also collected an $800 refundable security deposit, a $200 nonrefundable pet deposit, and $800 for the “last month’s rent.” The couple signed a one-year lease. Pam agreed to lower the rent by $100 per month in exchange for some minor repairs and maintenance that was needed on the property. The couple and Pam agreed upon a list of jobs and their schedule of completion that would be done during the lease. At the end of the year, the couple had completed the list per the schedule. On a sad note, Pam’s father passed away during the current year. He had a life insurance policy with Pam and her mother as beneficiaries. Pam’s portion of the life insurance proceeds was $200,000. Questions: What is Pam’s filing status for the current year? What is the gross income that should be reported on Pam’s return? (Do not deduct any rental expenses….just include all income) Please show the detail of your calculation. How much of her income will be taxed at “preferential rates?”
Pam is separated from her husband, Ted. Ted moved to an apartment in the same city two years ago, but they have not finalized their divorce yet. They live in a common law state. They have one daughter, Rainey, who is eight years old and lives with Pam most of the time. She spends every other weekend and usually one week night with her father. Ted works for XYZ International. He earned a salary of $96,000 for the current year. His salary was his only source of income.
Pam works for ABC Corp. as an accountant. Her salary for the current year was $88,000. ABC is a great place to work. Pam’s health insurance (valued at $4,800 per year) and $6,000 in childcare benefits are provided by ABC Corp. She even received a Christmas bonus of $2,500 in addition to her salary. She held on to the check until January when she cashed it to use on a ski vacation for her and Rainey.
Pam slipped and fell at work. She had to undergo surgery on her ankle. She received worker’s compensation benefits totaling $3,200. Her medical bills were covered by the worker’s compensation policy as well.
She received a federal income tax refund of $1,200 and a state income tax refund of $550 from her prior year tax return. She filed last year’s taxes on March 2 and received both of these refunds in April of the current year. She did itemize deductions last year and her itemized deductions were significantly higher than her standard deduction.
Pam has a number of investments. She sold her stock in Alphabet (Google) for $10,000. She had purchased the stock twelve years ago for $8,000. (Profit of $2,000) She also sold some stock in General Electric. She purchased the stock ten months before selling it, and she ended up with a loss of $850 in just that short time! Her remaining portfolio of investments (other than those discussed in the previous paragraph) increased in value during the course of the year. By December 31, the total increase was $5,500. In addition to these investments, her mother gave her stock valued at $25,000. Pam’s mother had a basis in the stock of $12,000 and had owned the stock for 7 years before giving it to Pam. Pam received $200 in interest on corporate bonds, $50 in interest on state bonds, and $700 in qualified dividends.
Since Pam is an accountant, she does a little bit of work on the side.
She prepares the payroll tax returns and income tax returns for her veterinarian. In return for doing those taxes, Pam gets her pets’ vaccinations, grooming services, and some boarding time for free. Pam figures she is saving about $1,500 on the cost of veterinary care for her pets.
She is a 20% shareholder in an S corporation that paid her $5,000 in salary to do the bookkeeping, and gave her an additional $6,000 in distributions. The manager of the S corporation exclaimed that next year if they do nearly so well, that distribution might even be larger! This year they netted earnings of $500,000!!(20% x $500k = $100,000)
Pam owns a single-family house that she uses for rental property. The property was vacant during January and February, but she found a nice couple with two children and a dog to move in at the beginning of March. The house rents for $800 per month. She also collected an $800 refundable security deposit, a $200 nonrefundable pet deposit, and $800 for the “last month’s rent.” The couple signed a one-year lease. Pam agreed to lower the rent by $100 per month in exchange for some minor repairs and maintenance that was needed on the property. The couple and Pam agreed upon a list of jobs and their schedule of completion that would be done during the lease. At the end of the year, the couple had completed the list per the schedule.
On a sad note, Pam’s father passed away during the current year. He had a life insurance policy with Pam and her mother as beneficiaries. Pam’s portion of the life insurance proceeds was $200,000.
Questions:
What is Pam’s filing status for the current year?
What is the gross income that should be reported on Pam’s return? (Do not deduct any rental expenses….just include all income) Please show the detail of your calculation.
How much of her income will be taxed at “preferential rates?”
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