56. LO.1, 3 Nell, single and age 38, had the following income and expense items in 2013:

Nonbusiness bad debt $ 6,000 Business bad debt 2,000 Nonbusiness long-term capital gain 4,000 Nonbusiness short-term capital loss 3,000 Salary 50,000 Interest income 3,000 Determine Nell’s AGI for 2013.

i. $9,500 interest expense on a home mortgage (paid to San Jose Savings and Loan).
j. $15,000 fair market value of silverware stolen from her home by a burglar on October 12, 2012. Jane had paid $14,000 for the silverware on July 1, 2003. She was reimbursed $1,500 by her insurance company.
k. Jane had loaned $2,100 to a friend, Joan Jensen, on June 3, 2009. Joan declared bankruptcy on August 14, 2012, and was unable to repay the loan. Assume that the loan is a bona fide debt.
l. Legal Services, Inc., withheld Federal income tax of $18,000 and FICA tax of $5,448 {Social Security tax of $4,050 [($101,000 − $4,580) × 4.2%] + Medicare tax of $1,398 [($101,000 − $4,580) × 1.45%]}.
m. Alimony of $10,000 received from her former husband, Ted Smith.
n. Interest income of $800 on City of Boca Raton bonds.
o. Jane made estimated Federal tax payments of $1,000.
p. Sales taxes from the sales tax table of $964.
q. Charitable contributions of $2,500.
r. In November 2012, Jane was involved in an automobile accident. At the time of the accident, Jane’s automobile had an FMV of $45,000. After the accident, the automobile’s FMV was $38,000. Jane’s basis in the car was $52,000. Jane’s car was covered by insurance, but because the policy had a $5,000 deduction clause, Jane decided not to file a claim for the damage.
Part 1—Tax Computation Compute Jane Smith’s 2012 Federal income tax payable (or refund due). If you use tax forms for your computations, you will need Forms 1040 and 4684 and Schedules A, C, and D. Suggested software: H&R BLOCK At Home.
Part 2—Tax Planning In 2013, Jane plans to continue her job with Legal Services, Inc. Therefore, items

a, d, and l will recur in 2013. Jane plans to continue her typing services business (refer to item

b) and expects gross receipts of $26,000. She projects that all business expenses (refer to item h) will increase by 10%, except for office rent, which, under the terms of her lease, will remain the same as in 2012. Items

e, f, g, j, k, and r will not recur in 2013.
Items

c, i, m, n, p, and q will be approximately the same as in 2012.
Jane would like you to compute the minimum amount of estimated tax she will have to pay for 2013 so that she will not have to pay any additional tax upon filing her 2013 Federal income tax return. Write a letter to Jane that contains your advice and prepare a memo for the tax files.