Diana and Ryan Workman were married on January 1 of last year. Diana has an 8 year old son, Jorge, from her previous marriage. Ryan works as a computer Programmer at Datafile Inc. and earns of $96,000. Diana is a self-employed accountant. The Workmans reported the following financial information pertaining to their activities during the current year. a Ryan earned a $96,000 salary for the year. In addition, the company paid $4,000 for health insurance for Ryan's family. The company withheld $18,000 of Federal Taxes and $2,000 of state taxes. b. Ryan borrowed $12,000 from DI to purchase a car. DI charged him 2 percent interest on the loan, which Ryan paid on December 31, but would have charged Ryan $720 if interest was calculated at the applicable federal interest rate. Assume that tax avoidance was not a motive for the loan. c. Diana received $2,000 in alimony and S4, 500 in child support payments from her former husband. d. The Workmans received $500 of interest from corporate bonds and $250 of interest from a municipal bond. Diana owned these bonds before she married Ryan. e. The couple bought 50 shares of Target Inc for $40 per share on July 2. The stock was worth $47 a share on December 31. The stock paid a dividend of $1.00 per share on December 1. f. Diana's father passed away on April 14. She inherited cash of $50,000 and his baseball card collection valued at $2,000. As the beneficiary of her father's life insurance policy. Dianna also received $150,000. g. The couple spent a weekend in Atiantic City in November and came home with gambling winnings of $1, 200. h. Ryan received a $400 watch for reaching 10 years of continuous service with Datafile. i. Ryan was hit and injured by a drunk driver while crossing the street at a crosswalk. He was unable to work for a month. He received $6,000 from his disability insurance. Datafile paid the premiums for Ryan but they reported them on his W-2 at the year-end. j. The drunk driver who hit Ryan was required to pay his $2,000 medical costs, $1, 500 for the emotional trauma he suffered and $5,000 of punitive damages. k. For meeting his performance goals this year, Ryan was informed on December 27^th that he would receive a $5,000 year-end bonus. DI mailed the check to Ryan on December 30 but Ryan did not receive the check at his home until January 2. l. Diana is a 10% owner of MNO, Inc., a Subchapter S corporation. The company reported ordinary business income for the year of $92,000. Diana acquired the MNO stock last year. m. Diana's revenue for the business was $37, 500. In addition, customers owed her $5, 500 at the year-end. Diana accounts for her business activities using the cash method of accounting. n. Diana also made four estimated tax payments for Federal Income Taxes in the amount of $1, 100 per quarter as required. o. The Workman's are currently renting an apartment until they decide on a school district for Jorge. They have $2, 400 in other itemized deductions. Required: Using the information above, compute taxable income for the workmans. Ignore any self-employement tax issues
