JOE AND JILL BIDING TAX PROBLEM --- AC 402

***This tax problem should serve as an overview of the material covered to this point.***

Joe and Jill Biding are married taxpayers who live at 666, Cooperation Drive, Washington, DC. Joe is 72 years old, while Jill is 48. Their social security numbers are 123-45-6789 (Joe) and 123-45-6781 (Jill). The taxpayers elect to contribute to the election campaign fund.

Joe and Jill have six possible (you decide) dependents. Their oldest daughter, Harris (SS# 423-44-3113), is 19 years old and works in Washington, DC where she lives in her own apartment. She is a part-time student at Georgetown majoring in the theatrical arts. She worked earning $4,100. Joe and Jill provided over half of her support.

They have a daughter, Yellen, who is 20 years old, goes to college full-time and worked in the summer earning $4,500 (ss# 424-77-6666). She also had unearned income of $2,000 in 2021.

They have had a foster child, Hunter, living with them since 06/01/18. He is 8 years old and his Social Security number is 422-45-9843. He attended the Donkeys Daycare ID # 67-08980808 at a cost of $9,200.

Joes mother, Catherine (ss# 555-22-3333), is 94 years old and lives in a nursing home for medical reasons. Her gross income is $39,000. Joe and Jill provide her $2,000 per month to help cover some of the cost of the nursing home. Her social security number is 455-23-8998.

Jills father, Donald, lives with them and is a greeter at Targ-Mart. He earned $10,250 from the job. Joe and Jill provided over 50% of the support of her father. His social security number is 476-99-7374.

Joes good friend from college, Sven, is down on his luck and living in Mexico. He earned $1,000 for the year. Joe sends him $1,500 per month. He has no social security number.

1

Joe is a lobbyist for the Politico Corporation, which has an excellent retirement plan for its employees (Joe participates in plan). His form W-2 shows his annual salary, federal income tax withholdings, and state income tax withholdings.

Wages Federal Withholding Taxes State Withholding Taxes

$

430,000 80,000 12,000

During 2021, Joe and Jill received interest and dividend income from several institutions. This information is summarized below from their Forms 1099-DIV and 1099-INT. In addition, Jill received $10,000 interest on New York City bonds.

Bank for Savings Oversees Corporation Do Not Bribe Me Corporation (of which $1500 a L/T capital gain distribution rest is ordinary)

Joe and Jill's personal records indicate that the following personal expenses were incurred in 2021.

Trips to Los Angeles --- airfareandlodging....... $11,549 whilemeals........................ 4,018 entertainment....................... 2,393

(trips were to visit family members)

Preparation fee for 2020 tax return (paid in 2021) . . . . Health insurance premiums for the family (not self-employed) . . . . . . . . . Unreimbursedphysiciancharges.............. 5,002 Propertytaxes...................... 2,908

4,640

$ 3,001 3,530 2,860

8,005

2

Salestaxes ....................... 8,422

Transportation to hospital (950 miles) . . . . . . . . . . ?

Prescriptiondrugs.................... 2,848

Non-prescriptiondrugs.................. 3,823

ContributionsmadeincashtoUnitedWay......... 3,053

Contributions made in cash to qualified charity . . . . . 2,383

Home mortgage interest (qualifying residential) . . . . . 12,834

Home mortgage interest on Condominium . . . . . . . . . . 5,999

CreditCardinterest................... 19,375

Jobhuntingexpenses................... 2,098

Personal property tax on value of personal autos . . . . . 806

Contributions of LT capital gain property . . . .. Cost 3,437 (to a qualified charity who sold it immediately) FMV 9,820

Groceries......................... 7,186

3

Joe and Jill incurred the following transactions involving capital assets in 2021.

• On May 8, 2021, Jill sold 600 shares of ILost Corporation stock. Her basis in the stock was $3,220 (May 12, 1998) and she sold it for $18,200.

• On February 3, 2021, the Bidings sold 2,000 shares of Commodity stock for $10,654. Joe had inherited the stock from his grandmother. His grandmother had originally purchased it for $4,000 on June 12, 1999. The stock was worth $7,937 on the date of her death.

• On December 5, 2021, Joe sold a personal car that he had purchased from his dad for $8,000 on December 4, 2008. He sold it for $1,500.

  The Bidings own and rent-out another vacation house in Little Rock, Arkansas which was used for personal purposes by the Bidings for 29 days and rented for 101 days (use IRS approach). They received rents of $24,567 in 2021. Their expenses are as follows: cleaning and maintenance, $4,890; commissions, $3,000; real estate taxes, $7,001; utilities $5,092 and insurance $1,000. Their house was acquired on June 30, 2012 for $1,300,000. They spend less than 20 hours per year dealing with the rental property.

  Answer the following (10) questions (#2 has 3 parts):

1. How many dependency exemptions do the Bindings have?

2. Which line and Form/Schedule do the following go?

   a. Wages

   2. Federal Withholding

   3. State Withholdings

3. Calculate total B (interest and dividends) for Schedule B.

4. Calculate schedule A itemized deductions amount for each category.

5. Calculate the short-term (line 7) & long-term (line 15) capital gains or losses for Schedule D.

6. Calculate the vacation home amount that will be reported on line 26 of Schedule E (IRS approach).

7. Would you advise your client, the Bidings, to itemize or take the standard deduction?

ABSOLUTELY NO INDIVIDUAL WILL WORK TOGETHER IN ANY WAY, SHAPE, FORM OR FASHION ON THIS TAX PROBLEM. DOING SO WILL RESULT IN AN F IN THIS COURSE WHERE VIOLATION OF THE UAB HONOR CODE HAS OCCURRED. YOU MAY ALSO NOT USE ANY SOFTWARE TO ASSIST YOU IN THIS PROBLEM.