ACC 423 Tax Computation Problem Patrick and Doris Davis are married taxpayers, ages 44 and 42, respectively, who file a joint return for 2020. The Davis' live at 1414 Orleans Avenue, Atlanta, GA 46032. Patrick is an assistant manager at Atlanta Motor Inn, and Donna is a teacher at Atlanta Elementary School. They present you with W-2 forms that reflect the following information: Paul Donna $56,000 Salary $68,000 6,770 1,400 Federal tax withheld 6,630 1,100 State income tax withheld FICA (Social Security and Medicare) withheld Social Security numbers 5,202 111-11-1112 284 123-45-6789 Doris is the custodial parent of two children from a previous marriage who reside with the Davis throughout the school year. The children, Landon and Janet Parker, reside with their father, Ben, during the summer Relevant information for the children follows: Larry Jane 17 18 123-45-6788 123-45-6787 Age Social Security numbers Months spent with Davises 9 9 Under the divorce decree, Ben pays child support of $150 per month per child during the nine months the children live with the Davises. Ben says that he spends $200 per month per child during the three summer months they reside with him. Doris and Patrick can document that they provide $2,000 support per child per year. The divorce decree is silent as to which parent can claim the exemptions for the children In August, Patrick and Doris added a suite to their home to provide more comfortable accommodations for Henrietta Smith (123-45-6786), Doris's mother, who had moved in with them in February 2019 after the death of Doris' father. Not wanting to borrow money for this addition, Patrick sold 300 shares of AAA Corporation stock for $50 per share on May 3, 2020, and used the proceeds of $15,000 to cover construction costs. The Davises had purchased the stock on April 29, 2015, for $25 per share. They received dividends of $750 on the jointly owned stock a month before the sale Henrietta, who is 66 years old, received $7.500 in Social Security benefits during the year, of which she gave the Davises $2,000 to use toward household expenses and deposited the remainder in her personal savings account. The Davises determine that they have spent $2,500 of their own money for food, clothing medical expenses, and other items for Hannah. They do not know what the rental value of Henrietta's suite would be, but they estimate it would be at least $300 Interest paid during the year included the following: per month Home mortgage interest (paid to Carmel Federal Savings & Loan) Interest on an automobile loan (paid to Carmel National Bank) Interest on Citibank Visa card $7,890 1,660 620 In July, Patrick hit a submerged rock while boating. Fortunately, he was uninjured after being thrown from the boat and landing in deep water. However, the boat, which was uninsured, was destroyed Paul had paid $25,000 for the boat in June 2019, and its value was appraised at $18,000 on the date of the accident The Davises paid doctor and hospital bills of $12,700 and were reimbursed $2,000 by their insurance company. They spent $640 for prescription drugs and medicines and $5.904 for premiums on their health insurance policy. They have filed additional claims of S1,200 with their insurance company and have been told they will receive payment for that amount in January 2021. Included in the amounts paid for doctor and hospital bills were payments of $380 for Henrietta and $850 for the children Additional information of potential tax consequence follows: $6,850 1,379 4,600 Real estate taxes paid Sales taxes paid (per table) Contributions to church Appraised value of books donated to public library Refund of state Income tax for 2019 (the Deckers itemized on their 2019 Federal tax return, and their total state and local taxes were less than $10,000) 740 1,520 Compute net tax payable or refund due for the Davises for 2020. If the Davises have overpaid, the amount is to be credited toward their taxes for 2021