Meet Betty Ann & Bart Summerfield

Tax Planning Clients

Betty Ann (age 45) & Bart (age 52) Summerfield have been married for 25 years and have one adult child, Alan, who is living on his own.

Betty Ann & Bart file joint tax returns. The table below summarizes their financial data for tax purposes. Use this information when you are answering the questions that follow.

Tax Item	Amount
Barts Earnings	$110,000
Betty Anns Earnings	$125,000
Federal Tax Withholdings	$22,700
State Income Tax Withholdings	$10,750
FICA & M/C	$17,978
Savings Account Interest (3.0% per year)	$3,200
State Refund from Prior Year	$2,425
Home Mortgage Interest Paid	$12,500
Real Estate Taxes Paid	$24,000
Charitable Contributions	$3,000
Unreimbursed Medical Expenses	$1,800
Stock Ownership: United Motor Company (purchased 9 months ago & which they still hold)	Current Value: $4,000 Cost basis: $8,000
Whole Life Insurance Policy	Face Value: $1,000,000 Cash Value: $15,000 Owner: Bart Beneficiary: Betty Ann Insured: Bart Policy Dividend: $300

The Summerfields itemized deductions for their federal return last year. Currently, neither Betty Ann nor Bart has access to a qualified retirement plan through their work and they have not funded IRAs up to this point in time. They have access to a Section 125 flexible spending account through Betty Anns employer. To date, they have not funded the account. Open enrollment is coming up and lasts for the next 30 days. For purposes of solving this case, use the tax information shown in the Appendix.

Please use this data to answer the questions in the Case Analysis. Show all formulas and computations. Justify all your responses completely. The Tax Tables are attached in the Appendix.

Question:

1. Compute the Summerfields AGI. Show your work.?